You’ve just opened a margin account with $14,000 at your local brokerage firm. Y

Question

You’ve just opened a margin account with $14,000 at your local brokerage firm. You instruct your broker to purchase 700 shares of Landon Golf stock, which currently sells for $61 per share. Suppose the call money rate is 5.5 percent and your broker charges you a spread of 1.25 percent over this rate. You hold the stock for 6 months and sell at a price of $67 per share. The company paid a dividend of $0.52 per share the day before you sold your stock.

What is your total dollar return from this investment? (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

What is your effective annual rate of return? (Round your answer to 2 decimal places. Omit the "%" sign in your response.)

You’ve just opened a margin account with $14,000 at your local brokerage firm. You instruct your broker to purchase 700 shares of Landon Golf stock, which currently sells for $61 per share. Suppose the call money rate is 5.5 percent and your broker charges you a spread of 1.25 percent over this rate. You hold the stock for 6 months and sell at a price of $67 per share. The company paid a dividend of $0.52 per share the day before you sold your stock.

Explanation / Answer

Stock Sale Price + Dividends Received - Stock Purchase Price - Margin Interest Stock Purchase Price / stock purchase price

2.

Stock Sale Price + Dividends Received - Stock Purchase Price - Margin Interest Stock Purchase Price / stock purchase price

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