Question

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.

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

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

Answer #1

) 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....

*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...

*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 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...

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.)

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?

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 2 minutes ago

asked 2 minutes ago

asked 12 minutes ago

asked 25 minutes ago

asked 39 minutes ago

asked 40 minutes ago

asked 47 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago