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What would be the pros and cons of margin financing

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Consider an an investor who purchases 100 shares of Company XYZ stock at $100 per share. The investor funds half the purchase price with their own money and buys the other half on margin, bringing the initial cash outlay to $5,000. One year later, the share price become $200 One year later share price become $50.

Required:

Comment on the above mentioned both situations?

Support your answer with calculation.

What would be the pros and cons of margin financing?

Reference no: EM132607760

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