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) An investor is considering buying XYZ Corp. stock on margin. His stockbroker informed him that...

) 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.

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a. What is the percentage earned on the investment if the stock is bought for cash (i.e., the investor did not use margin)?

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b. What is the percentage earned on the investment if the stock is bought on margin?

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