You’ve just opened a margin account with $18,000 at your local brokerage firm. Y

Question

You’ve just opened a margin account with $18,000 at your local brokerage firm. You instruct your broker to purchase 750 shares of Landon Golf stock, which currently sells for $78 per share. Suppose the call money rate is 6.5 percent and your broker charges you a spread of 1 percent over this rate. You hold the stock for 3 months and sell at a price of $85 per share. The company paid a dividend of $.33 per share the day before you sold your stock.
1. What is your total dollar return from this investment? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.) Dollar return $ =
2. What is your effective annual rate of return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) Effective annual return %= You’ve just opened a margin account with $18,000 at your local brokerage firm. You instruct your broker to purchase 750 shares of Landon Golf stock, which currently sells for $78 per share. Suppose the call money rate is 6.5 percent and your broker charges you a spread of 1 percent over this rate. You hold the stock for 3 months and sell at a price of $85 per share. The company paid a dividend of $.33 per share the day before you sold your stock.
1. What is your total dollar return from this investment? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.) Dollar return $ =
2. What is your effective annual rate of return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) Effective annual return %= You’ve just opened a margin account with $18,000 at your local brokerage firm. You instruct your broker to purchase 750 shares of Landon Golf stock, which currently sells for $78 per share. Suppose the call money rate is 6.5 percent and your broker charges you a spread of 1 percent over this rate. You hold the stock for 3 months and sell at a price of $85 per share. The company paid a dividend of $.33 per share the day before you sold your stock.
1. What is your total dollar return from this investment? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.) Dollar return $ =
2. What is your effective annual rate of return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) Effective annual return %=

Explanation / Answer

A. Ans.

Firstly we calculate cost of investment:-

Secondly return from investment:-

Net return from investment = Return from investment - Cost of investment

   63360 - 59743.13 = 3616.87. ( Doller return)

2. What is your effective annual rate of return.

Annual rate of return = (c.f.a.t - depreciation)*1/no of year) / Averege investment.

                              = (3616.87 * 1*3/12)/(59743.13/2)

                              = 904.22 / 2,9871.57

Effective annual return % = 3.03

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