An investor purchases 200 shares at $60 per share using an 80% margin requirement. The margin loan is at a 10% rate, and in one year the price is at $50 per share. Ignoring dividends, the one year rate of return is

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The initial investment is $12,000 (200 shares at $60 each). With an 80% margin requirement, the investor's own money is $9,600 (80% of $12,000), and the loan amount is $2,400. After one year, the value of the shares is $10,000 (200 shares at $50 each). The investor owes the original loan amount plus interest, which is $2,400 + ($2,400 * 10%) = $2,640. The net value after selling the shares and paying off the loan is $10,000 - $2,640 = $7,360. The loss is $9,600 (initial investment) - $7,360 = $2,240. The rate of return is the loss divided by the initial investment: $2,240 / $9,600 = -23.33%, rounded to -23%.

An Investor Purchases 200 Shares at $60 Per Share Using