Robin sold 800 shares of a non-dividend paying stock this morning for a total of $29,440.She had purchased these shares on margin nine months ago at a cost per share of $35.The initial margin requirement on this stock is 60 percent and the maintenance margin is 30 percent.Robin pays 1.2 percent over the call money rate of 4.9 percent.What is her total dollar return on this investment?

Question

Quizplus · Accepted Answer

Initial investment = 800 × $35 × 0.60 = $16,800 Loan repayment = [800 × $35 × (1 - 0.60)] × [1 + (0.012 + 0.049)]^{9 / 12} = $11,708.59 Holding period dollar return = ($29,440 - $11,708.59 - $16,800) = $931.41

Robin Sold 800 Shares of a Non-Dividend Paying Stock This