You purchased 100 shares of common stock on margin for $60 per share. The initial margin is 50%, and the stock pays no dividend. What would your rate of return be if you sell the stock at $72 per share? Ignore interest on margin.
A) 28%
B) 33%
C) 14%
D) 40%
E) 24%

Question

Quizplus · Accepted Answer

The initial investment is $3,000 (50% of $6,000). Selling at $72 gives $7,200. Profit is $1,200 ($7,200 - $6,000). Rate of return is $1,200/$3,000 = 40%.

You Purchased 100 Shares of Common Stock on Margin for $60