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melomori [17]
3 years ago
8

A year ago, Kim Altman purchased 200 shares of BLK, Inc. for $25.50 on margin. At that time the margin requirement was 40 percen

t. If the interest rate on borrowed funds was 9 percent and she sold the stock for $34, what is the percentage return on the funds she invested in the stock
Business
1 answer:
salantis [7]3 years ago
4 0

Answer:

69.83%

Explanation:

Calculation for Kim Altman percentage return on the funds she invested in the stock

Calculation for Kim’s own money =

$5100 x .4 = $2040

Caluculation for total Long Position =

$34 x 200 = $6800

Calculation for Interest Borrowed =

$3060 x .09 = $275.4

Total gain/profit =

$6800 - $5100 - $275.4

= $1424.60

Percentage on Return

= $1424.60 / $2040 = .6983

.6893x 100 = 69.83%

Therefore the percentage return will be 69.83%

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2. Sunk costs are the costs which are already incurred by the entity in the past and which are not relevant to decision made today. In this case, sunk cost is the cost of the machine purchased seven years ago for $405,000.

3. Opportunity cost is the profit forgone by chosen alternative course of action. In this case, the Opportunity cost regarding the decision to invest in the model 200 machine is $450,600.

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