Question

You purchase 150 shares for $70 a share ($10,500), 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):

Answer 1

Answer:

57.14%

Explanation:

Missing word "25 percent."

Gain on the stock = (150*$80) - $10,500

Gain on the stock = $ 12,000 - $10,500

Gain on the stock = $1,500

If Margin requirement is 25%, The Margin = 10,500*25% = $2,625

Return on Investment = $1,500/$2,625 * 100 = 0.571429 * 100 = 57.1429% = 57.14%