Question

*Please show work and explain*

An investor bought 100 shares of Copier Corp. for $90 a share. The firm paid an annual dividend of $4 a share; the margin requirement was 60 percent with an interest rate of 8 percent on borrowed funds, and commissions on the purchase were $15 and on the sale were another $15. The price of the stock rose to $120 in one year.

What is the percentage return earned on the investment if the stock is bought on margin? Show answer in percentage terms to two places

Answer #1

Return on investment if bought on margin | (Net sale price + Dividend - Interest - Purchase price)/Net margin paid | |||||

Net purchase price | (100*90)+15 | |||||

Net purchase price | $9,015 | |||||

Margin amount paid | 60%*((100*90)+15) | |||||

Margin amount paid | $5,409 | |||||

Amount borrowed | 40%*((100*90)+15) | |||||

Amount borrowed | $3,606 | |||||

Interest on amount borrowed | 3606*8% | |||||

Interest on amount borrowed | 288.48 | |||||

Dividend received | $400 | 4*100 | ||||

Net sale price | (120*100)-15 | |||||

Net sale price | $11,985 | |||||

Return on investment if bought on margin | (11985+400-288.48-9015)/5409 | |||||

Return on investment if bought on margin | 3081.52/5409 | |||||

Return on investment if bought on margin | 56.97% | |||||

Thus, return on investment if bought on margin is
56.97% |
||||||

*Please show work and explain*
An investor bought 100 shares of Copier Corp. for $90 a share.
The firm paid an annual dividend of $4 a share and commissions on
the purchase were $15 and on the sale were another $15. The price
of the stock rose to $120 in one year.
What is the percentage return earned on the investment if the
stock is bought for cash (i.e., the investor did not use
margin)?
Show your answer in percentage...

An investor is considering buying XYZ
Corp. stock on margin. His stockbroker informed him that 100 shares
of XYZ Corp. cost $42 a share. The margin requirement was 60
percent with an interest rate of 4.5 percent on borrowed funds, and
commissions on the purchase and sale were 4%. One year after the
investor invested in stock XYZ corp. paid an annual dividend of
$1.55 a share. The price of the stock also rose to $70 in one
year.
...

) An investor is
considering buying XYZ Corp. stock on margin. His stockbroker
informed him that 100 shares of XYZ Corp. cost $42 a share. The
margin requirement was 60 percent with an interest rate of 4.5
percent on borrowed funds, and commissions on the purchase and sale
were 4%. One year after the investor invested in stock XYZ corp.
paid an annual dividend of $1.55 a share. The price of the stock
also rose to $70 in one year....

An investor purchased on margin Orange Computer for $30 a share.
The stock's price subsequently increased to $50 a share at which
time the investor sold the stock. If the margin requirement were 60
percent and the interest rate on borrowed funds were 7 percent,
what would be the percentage earned on the investor's funds
(excluding commissions)? What would have been the return if the
investor had not bought the stock on margin?

An investor purchased 400 shares of a company at $30 per share.
The stock was bought on 65 percent margin (35 percent of the
purchase amount was borrowed). One month later, the investor had to
pay interest on the amount borrowed at a rate of 3 percent per
month. At that time, the investor received a dividend of $0.50 per
share. Immediately after receiving the dividend, he sold the shares
at $35 per share. The investor paid total commissions of...

An investor purchased 400 shares of a company at $30 per share.
The stock was bought on 65 percent margin (35 percent of the
purchase amount was borrowed). One month later, the investor had to
pay interest on the amount borrowed at a rate of 3 percent per
month. At that time, the investor received a dividend of $0.50 per
share. Immediately after receiving the dividend, he sold the shares
at $35 per share. The investor paid total commissions of...

An investor purchased 300 shares of a company at $25 per share.
The stock was bought on 70 percent margin (30 percent of the
purchase amount was borrowed). One month later, the investor had to
pay interest on the amount borrowed at a rate of 3 percent per
month. At that time, the investor received a dividend of $0.6 per
share. Immediately after receiving the dividend, he sold the shares
at $38 per share. The investor paid total commissions of...

An investor sells 100 shares short at $22. The sale requires a
margin deposit equal to 60 percent of the proceeds of the sale.
(8 points)
If the investor closes the position at $30, what was the
percentage earned or lost on the investment?
If the position had been closed when the price of the stock was
$17, what would have been the percent earned or lost on the
position?
PLEASE SHOW WORK

You have just bought (on 50% margin) 100 shares of IBM Corp.
common stock for $108 per share. One year from now you expect to
sell the stock for $140. The interest charge will be 9%. What
return do you expect to earn on your investment? (Show all work.
Ignore commissions.)

Lisa Lasher buys 420 shares of stock on margin at $25 per share.
If the margin requirement is 40 percent, how much must the stock
rise for her to realize a 30-percent return on her invested funds?
(Ignore dividends, commissions, and interest on borrowed funds.)
Round your answer to the nearest cent.

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