You purchase 1,000 shares of stock at a price of $56 with an initial margin or 50 percent. If you sell the stock when the price is $63 per share, what was your holding period return? Ignore transaction costs and margin interest.
A) 22.50%
B) 16.25%
C) 12.50%
D) 18.75%
E) 25.00%

Question

Quizplus · Accepted Answer

The holding period return is calculated as the profit divided by the initial investment. The profit is ($63 - $56) * 1,000 = $7,000. The initial investment is 50% of $56,000, which is $28,000. The holding period return is $7,000 / $28,000 = 25.00%.

You Purchase 1,000 Shares of Stock at a Price of $56