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Whitepunk [10]
3 years ago
11

A stock was purchased for $51 a share and sold eleven months later for $54 a share. If the shares were purchased totally with ca

sh the holding period return would be _____ percent as compared to _____ percent if the purchase was made using 70 percent margin. Ignore trading costs and margin interest. (Hint: Assume you purchase 10 shares on margin for margin trading case).
Business
1 answer:
nekit [7.7K]3 years ago
7 0

Answer: 5.88%; 8.40%

Explanation:

In finance, the holding period return is simply the return that a portfolio or an asset has accrued during the entire period that the asset or portfolio was being held. It is a way of measuring the performance of an investment.

Based on the information that have been provided in the question,

HPR without margin will be:

= ($54 - $51)/$51

= $3/$51

= 0.588

= 5.88%

HPR with margin will be:

= ($54 - $51)/($51 × 0.70)

= $3/($35.7)

= 0.84

= 8.40%

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Explanation:

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Both methods would therefore yield the same amount if the government uses either of them.

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3 years ago
Heather Hudson makes stuffed teddy bears. Recent information for her business follows: Selling price per bear $ 32.50 Total fixe
Neporo4naja [7]

Answer: 26.5% increase

Explanation:

Current profit = Sales - Variable costs - fixed costs

= ((32.50 - 16.50) * 360 bears) - 1,420

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= $5,492

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= 26.5% increase

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anzhelika [568]

Answer:

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Explanation:

5 0
3 years ago
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A firm has determined its cost of each source of capital and its optimal capital structure which is comprised of the following s
barxatty [35]

Answer:

10.25%

Explanation:

Data provided in the question:

Long-term debt = 45%, after-tax cost = 7%

Preferred stock = 15%, after-tax cost = 10%

Common stock equity = 40%, after-tax cost = 14%

Now,

The  weighted average cost of capital for this firm will be calculated as:

= Long term debt × after-tax cost + Preferred stock × after-tax cost + Common stock equity × after-tax cost

or

= 0.45 × 0.07 + 0.15 × 0.10 + 0.40 × 0.14

or

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5 0
3 years ago
Which one of the following statements related to risk is correct?
krok68 [10]

Answer:

c. The systematic risk of a portfolio can be effectively lowered by adding T-bills to the portfolio.

Explanation:

If we want to less the systematic risk of the portfolio so we have to add the t-bills so that the systematic risk could be minimized

The other statements that are mentioned are incorrect as for risk these statements are wrong

So only c option would be considered as correct

Hence, the correct option is c.

7 0
3 years ago
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