Tony purchased 100 shares of T-Rex stock for $43 a share.On the same day,Sam also purchased 100 shares of T-Rex stock for $43 a share.Tony paid cash for his purchase while Sam used margin.The initial margin requirement on this stock is 60 percent while the maintenance margin is 40 percent.Both Tony and Sam sold their shares after eight months at a price of $40 a share.The stock pays no dividends.Tony had a holding period percentage return of ________ percent as compared to Sam's ________ percent return.Ignore margin interest and trading costs.
A) -4.19; -6.98
B) -4.19; -11.63
C) -6.98; -4.19
D) -6.98; -11.63
E) -11.63; -7.56

Question

Quizplus · Accepted Answer

Tony's HPR without margin = [100 × ($40 - $43)] / (100 × $43) = -6.98 percent
Sam's HPR with margin = [100 × ($40 - $43)] / (100 × $43 × 0.60) = -11.63 percent

Tony Purchased 100 Shares of T-Rex Stock for $43 a Share.On