Suppose you purchase 950 shares of stock at $63 per share with an initial cash i
ID: 2382388 • Letter: S
Question
Suppose you purchase 950 shares of stock at $63 per share with an initial cash investment of $20,000. The call money rate is 5 percent and you are charged a 1.5 percent premium over this rate.a. Calculate your return on investment one year later if the share price is $71. Suppose instead you had simply purchased $20,000 of stock with no margin. What would your rate of return have been now? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) Rate of return % = ??? Without margin, rate of return % = ???
b. Calculate your return on investment one year later if the share price is $63. Suppose instead you had simply purchased $20,000 of stock with no margin. What would your rate of return have been now? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) Rate of return % = ??? Without margin, rate of return % = ???
c. Calculate your return on investment one year later if the share price is $47. Suppose instead you had simply purchased $20,000 of stock with no margin. What would your rate of return have been now? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) Rate of return % = ??? Without margin, rate of return % = ??? Suppose you purchase 950 shares of stock at $63 per share with an initial cash investment of $20,000. The call money rate is 5 percent and you are charged a 1.5 percent premium over this rate.
a. Calculate your return on investment one year later if the share price is $71. Suppose instead you had simply purchased $20,000 of stock with no margin. What would your rate of return have been now? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) Rate of return % = ??? Without margin, rate of return % = ???
b. Calculate your return on investment one year later if the share price is $63. Suppose instead you had simply purchased $20,000 of stock with no margin. What would your rate of return have been now? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) Rate of return % = ??? Without margin, rate of return % = ???
c. Calculate your return on investment one year later if the share price is $47. Suppose instead you had simply purchased $20,000 of stock with no margin. What would your rate of return have been now? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) Rate of return % = ??? Without margin, rate of return % = ??? Suppose you purchase 950 shares of stock at $63 per share with an initial cash investment of $20,000. The call money rate is 5 percent and you are charged a 1.5 percent premium over this rate.
a. Calculate your return on investment one year later if the share price is $71. Suppose instead you had simply purchased $20,000 of stock with no margin. What would your rate of return have been now? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) Rate of return % = ??? Without margin, rate of return % = ???
b. Calculate your return on investment one year later if the share price is $63. Suppose instead you had simply purchased $20,000 of stock with no margin. What would your rate of return have been now? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) Rate of return % = ??? Without margin, rate of return % = ???
c. Calculate your return on investment one year later if the share price is $47. Suppose instead you had simply purchased $20,000 of stock with no margin. What would your rate of return have been now? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) Rate of return % = ??? Without margin, rate of return % = ???
Explanation / Answer
Question a. Loan Taken (950 x 63-20000) $ 39,850.00 Interest for 1 year @5% $ 1,992.50 Premium charges @1.5% $ 597.75 Interest Payment $ 2,590.25 Purchase cost (63 x 950) $ 59,850.00 Total Cost (59,850+1300) $ 62,440.25 Cost per share (61,150/950) $ 65.73 Market price after one year $ 71.00 Gain $ 5.27 Rate of Return % ( 5.27/63) 8.37 without margin Rate of Return % (71/63-1) 12.70 Question b. Loan Taken (950 x 63-20000) $ 39,850.00 Interest for 1 year @5% $ 1,992.50 Premium charges @1.5% $ 597.75 Interest Payment $ 2,590.25 Purchase cost (63 x 950) $ 59,850.00 Total Cost (59,850+1300) $ 62,440.25 Cost per share (61,150/950) $ 65.73 Market price after one year $ 63.00 Gain $ (2.73) Rate of Return % ( 5.27/63) -4.33 without margin Rate of Return % (63/63-1) 12.70 Question c. Loan Taken (950 x 63-20000) $ 39,850.00 Interest for 1 year @5% $ 1,992.50 Premium charges @1.5% $ 597.75 Interest Payment $ 2,590.25 Purchase cost (63 x 950) $ 59,850.00 Total Cost (59,850+1300) $ 62,440.25 Cost per share (61,150/950) $ 65.73 Market price after one year $ 47.00 Gain $ (18.73) Rate of Return % ( 5.27/63) -29.72 without margin Rate of Return % (63/63-1) 12.70
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