Question

**14- Jeff bought 100 shares of stock for $30.00 per share
on 70% margin. Assume Jeff holds the stock for one year and that
his interest costs will be $45 over the holding period. Jeff also
received dividends amounting to $0.30 per share. Ignoring
commissions, what is his percentage return on invested capital if
he sells the stock for $34 a share?**

Answer #1

Total amount of shares bought by jeff = $30.00 * 100 = $3000.00

Invested capital = 70% margin of $3000.00 = 0.70 * $3000.00 =
**$2100.00**

The return generated = Profit from selling the stock (Selling Price - Buying Price) + Dividend Earned during the year - interest costs for the period

= ($34 - $30) *100 + $0.30 * 100 (Number of Shares) - $45

= 4 * 100 + 30 - 45 = 400 +30 - 45 = **$385**

**Percentage return on invested capital =** Return
generated / Invested capital = $385 / $2100.00 **=
18.33%**

Jason bought 100 shares of ABC Co. stock for $58.00 per share on
65% margin. The maintenance margin is 30%. Assume he holds the
stock for three months and that his interest costs will be 9% per
year over the holding period. He gets a dividend payments of $0.75
per shares during this three months period. What is his approximate
percentage return on invested capital if the stock price went up by
5%?

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...

LaTresa purchased 100 shares of Outland Co. for $30.00 per share
on January 1, 2016. She received a dividend of $0.20 per share in
2016, $0.30 per share in 2017, $0.40 per share in 2018, and sold
her stock for $31.25 per share at the end of 2018. What was
LaTresa's total percentage return on this investment?

Hiral bought 10,000 shares of LuLu at $40 per share, with an
initial margin of 60%. He was charged 12% margin interest annually.
Two years later he sold the stock for $80 per share. LuLu declared
and paid a special dividend of $4 per share during the period Hiral
held the stock. What was Hiral's holding period return?
100%
150%
167%
183%

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...

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.

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.
...

You purchased 100 shares of common stock on margin at $45 per
share. Assume the initial margin is 50% and the stock pays no
dividend. What would the maintenance margin be if a margin call is
made at a stock price of $30? Ignore interest on margin. A.0.33
B.0.55 C.0.43 D.0.23 E.0.253. Assume you purchased 200 shares of GE
common stock on margin at $70 per share from your broker. If the
initial margin is 55%, how much did you...

Problem 4-01
You purchase 100 shares for $70 a share ($7,000), and after a
year the price rises to $80. Calculate the percentage return on
your investment if you bought the stock on margin and the margin
requirement was (ignore commissions, dividends, and interest
expense):
20 percent. Round your answer to one decimal place.
%
30 percent. Round your answer to one decimal place.
%
75 percent. Round your answer to one decimal place.
%

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 6 minutes ago

asked 9 minutes ago

asked 9 minutes ago

asked 11 minutes ago

asked 14 minutes ago

asked 22 minutes ago

asked 30 minutes ago

asked 31 minutes ago

asked 43 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago