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topjm [15]
3 years ago
8

You purchased 300 shares of common stock on margin for $60 per share. The initial margin is 60% and the stock pays no dividend.

What would your rate of return be if you sell the stock at $45 per share
Business
1 answer:
MrMuchimi3 years ago
7 0

Answer:

- 41.67%

Explanation:

For computing the rate of return first we have to compute the initial investment which is shown below:

= Number of shares × per share ×  initial margin percentage

= 300 shares × $60 per share × 60%

= $10,800

Now Loss on sale of common stock is

= (Selling price - purchase price) × number of shares  purchased

= ($45 - $60 ) × 300  shares

= - $4,500

So the rate of return will be:

= Loss ÷ Initial Investment

= - $4,500 ÷  $10,800

= - 41.67%

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