Question

You purchase 200 shares for $70 a share ($14,000), and after a year the price rises to $80. Calculate the percentage return on your investment if you bought the stock on margin and the margin requirement was (ignore commissions, dividends, and interest expense): 20 percent. Round your answer to one decimal place. % 45 percent. Round your answer to one decimal place. % 85 percent. Round your answer to one decimal place. %

Answer 1

14.29%

Step-by-step explanation:

Number of shares purchased= 200

Purchase price per share= $70

Year end price = $80

Total Investment cost = 200 shares * $70 per shares = $14,000

Percentage return earned on investment = Number of shares * (Year end price - Purchase price) / Investment

= 200 * ($80 - $70) / $14,000

= $2,000 / $14,000

= 0.142857

= 14.2857%

= 14.29%