Three months ago,Trevor purchased 500 shares of stock at a cost per share of $64.20.The purchase was made on margin with an initial margin requirement of 65 percent.Trevor pays 1.6 percent over the call money rate of 4.8 percent.What will his total dollar return be on this investment if he sells his shares today at a price per share of $63.40? Ignore dividends.
A) -$548.60
B) -$539.67
C) -$534.95
D) -$575.60
E) -$591.19

Question

Quizplus · Accepted Answer

Initial investment = 500 × $64.20 × 0.65 = $20,865 Loan repayment = [500 × $64.20 × (1 - 0.65)] × [1 + (0.016 + 0.048)]^{3 / 12} = $11,410.00 HPR = [(500 × $63.40) - $11,410.00 - $20,865] = -$575.60

Three Months Ago,Trevor Purchased 500 Shares of Stock at a Cost