Calculating return on investment
| Suppose you purchase 700 shares of stock at $52 per share with an initial cash investment of $14,000. 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 $60. Suppose instead you had simply purchased $14,000 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 $52. Suppose instead you had simply purchased $14,000 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 $36. Suppose instead you had simply purchased $14,000 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 | % |
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