You purchased 200 shares of a stock for $28 a share and sold them 4 months later for $30 a share. The initial margin was 60%. You received no dividend income. Your holding period return was _____ while it would have been ____ if not used margin for the purchase. Ignore interest and trading costs.
A) 10.29%; 6.99%
B) 10.95%; 9.06%
C) 11.90%; 7.14%
D) 11.90%; 17.87%
E) 10.45%; 11.90%

Question

Quizplus · Accepted Answer

The holding period return using margin is calculated as [(Selling Price - Purchase Price) / (Purchase Price * Initial Margin)] * 100 = [(30 - 28) / (28 * 0.6)] * 100 = 11.90%. Without using margin, it is [(30 - 28) / 28] * 100 = 7.14%.

You Purchased 200 Shares of a Stock for $28 a Share