Posted by **Anonymous** on Wednesday, April 2, 2008 at 9:37pm.

9. What will be the investor’s return if a stock rises by 7% if purchased on 50% margin?

10. What will be the investor’s return if a stock falls by 9% if purchased on 60% margin?

11. What is the investor’s profit on a short sale at $45 if covered at a price of $30?

- Anonymous -
**economyst**, Thursday, April 3, 2008 at 9:36am
I suggest you work out an example. Buy $100 of stock at 50% margin means $50 comes out of the investor's pocket, the other $50 is borrowed. The stock rises to $107, the stock is sold, the loan is repaid plus interest (of amount r). So investor is left over with ($57-r). Since the initial investment was 50, the rate of return is (57-r)/50. If the turn-around time is short (say one day), then r will be very small and the rate of return will be nearly 14%. Not bad for one day.

Take it from here.

## Answer This Question

## Related Questions

- economics - An investor sells a stock short for $36 a share. A year later the ...
- investing - How do I find stock on margin rate of return? This is the question: ...
- Math - Purchased $10,000 in stock, invested $5000 of own money, borrowed ...
- accounting - Last year Angela used her 60% margin account and purchased 100 ...
- FINANCE AND BANK - Last year Angela used her 60% margin account and purchased ...
- Stocks - An investor purchased 700 shares of stock at $54.03 per share. She ...
- Finance - An investor buys 100 shares of a $40 stock that pays an annual cash ...
- personal finance - Jo owns 150 shares of Delta General stock. She purchased the ...
- Finance - Question 2. 2. If an investor purchases a share of stock for $300, ...
- Precalculus - Suppose that an investor wants to invest up to 10,000. She plans ...

More Related Questions