Question

If a stock is initially priced at $60, and pays an annual $2 dividend. An investor uses cash to pay $35 a share and borrows the remaining funds at a 12 percent annual interest. What is the return if the investor sells the stock for $59 at the end of one year?

Answer #1

Particulars | Amount |

Sale price | 59.00 |

Less: investment | (35.00) |

Less: loan payment | (28.00) |

Add: dividends | 2.00 |

Dollar return | (2.00) |

/ own investment | 35.00 |

Return on investment | -5.7143% |

Answer is:

-5.7143%

please rate.

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