A trader has purchased 200 shares of a non-dividend-paying firm on margin at a price of $50
Question:
A trader has purchased 200 shares of a non-dividend-paying firm on margin at a price of $50 per share. The leverage ratio is 2.5. Six months later, the trader sells these shares at $60 per share. Ignoring the interest paid on the borrowed amount and the transaction costs, what was the return to the trader during the six-month period?
A. 20 percent.
B. 33.33 percent.
C. 50 percent.
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 100% (QA)
C is correct The return is 50 percent If the position had been unleveraged the ...View the full answer
Answered By
JAPHETH KOGEI
Hi there. I'm here to assist you to score the highest marks on your assignments and homework. My areas of specialisation are:
Auditing, Financial Accounting, Macroeconomics, Monetary-economics, Business-administration, Advanced-accounting, Corporate Finance, Professional-accounting-ethics, Corporate governance, Financial-risk-analysis, Financial-budgeting, Corporate-social-responsibility, Statistics, Business management, logic, Critical thinking,
So, I look forward to helping you solve your academic problem.
I enjoy teaching and tutoring university and high school students. During my free time, I also read books on motivation, leadership, comedy, emotional intelligence, critical thinking, nature, human nature, innovation, persuasion, performance, negotiations, goals, power, time management, wealth, debates, sales, and finance. Additionally, I am a panellist on an FM radio program on Sunday mornings where we discuss current affairs.
I travel three times a year either to the USA, Europe and around Africa.
As a university student in the USA, I enjoyed interacting with people from different cultures and ethnic groups. Together with friends, we travelled widely in the USA and in Europe (UK, France, Denmark, Germany, Turkey, etc).
So, I look forward to tutoring you. I believe that it will be exciting to meet them.
3.00+
2+ Reviews
10+ Question Solved
Related Book For
Investments Principles Of Portfolio And Equity Analysis
ISBN: 9780470915806
1st Edition
Authors: Michael McMillan, Jerald E. Pinto, Wendy L. Pirie, Gerhard Van De Venter, Lawrence E. Kochard
Question Posted:
Students also viewed these Business questions
-
In Problems 29 and 30, use the probabilities in the first tree diagram to find the probability of each branch of the second tree diagram. Start Start 113 113/ A B C D D' /1-1003100) (518114) D D' D...
-
Prepare flowcharts of the revenue and payroll cycle in your organization. Then, prepare a 300- 500-word examination of the cycles. Be sure to examine the internal controls within each cycle and any...
-
Many eating facilities serve one brand of soft drinks only, but the College Corner Café serves two different brands. On a Friday night here are the orders for cola. Test for randomness...
-
Suppose there are two identical forest plots except that one will be harvested and left as is while the second will be cleared after the harvest and turned into a housing development. In terms of...
-
First City Bank pays 7.5 percent simple interest on its savings account balances, whereas Second City Bank pays 7.5 percent interest compounded annually. If you made a $7,000 deposit in each bank,...
-
Rachael Ray Corporation had the following transactions. 1. Sold land (cost $12,000) for $15,000 2. Issued common stock for $20,000 3. Recorded depreciation of $17,000 4. Paid salaries of $9,000 5....
-
The Cooper Furniture Company of Potomac, Maryland, assembles two types of chairs (Recliners and Rockers). Separate assembly lines are used for each type of chair. Classify each cost item (AI) as...
-
Linda Butler is the new division controller of the snack-foods division of Daniel Foods. Daniel Foods has reported a minimum 15% growth in annual earnings for each of the past 5 years. The...
-
A. Based on this topology, what is the NTP level at SW2? Fa0/24 2960-24TT SW1 Internet Fa0/1 3 192.168.123.0/24 Server-PT pool.ntp.org 146.105.130.223 2 Fa0/24 2960-24TT SW2
-
Jason Williams purchased 500 shares of a company at \($32\) per share. The stock was bought on 75 percent margin. One month later, Williams had to pay interest on the amount borrowed at a rate of 2...
-
An online brokerage firm has set the minimum margin requirement at 55 percent. What is the maximum leverage ratio associated with a position financed by this minimum margin requirement? A. 1.55. B....
-
The wall shear stress w in a boundary layer is assumed to be a function of stream velocity U, boundary layer thickness , local turbulence velocity u, density , and local pressure gradient dp/dx....
-
40. Two identical strings (same mass and length), each fixed at both ends, are arranged near each other. If string A starts oscillating in its fundamental mode, it is observed that string B will...
-
A firm is trying to choose between 3 investments, all have a cost of capital of 11%. Year Project 1 Project 2 Project 3 Initial outlay $100,000 120,000 50,000 1 $ 10,000 32,000 10,000 2 20,000 32,000...
-
Discuss and analyzePlan Procurement Management,Conduct Procurement, and Control Procurement. How they applied toinvestigate a new drug's efficacy in treating a particular condition procurement...
-
Fairlane Company has an ROA of 8 . 6 percent and a payout ratio of 3 3 percent. What is its internal growth rate? Do not round intermediate calculations and enter your answer as a percent rounded to...
-
Sangarwe will deposit $ 3 0 0 every quarter into an investment annuity earning 4 . 5 % compounded quarterly for seven years. What is the difference in the amount of money that she will have after...
-
During the time 0.305 mol of an ideal gas undergoes an isothermal compression at 22.0oC, 518 I of work is done on it by the surroundings. (a) If the final pressure is 1.76 aims, what was the initial...
-
SBS Company have received a contract to supply its product to a Health Care Service Hospital. The sales involve supplying 1,250 units every quarter, the sales price is RM 85 per unit. The Client...
-
A put on XYZ stock with a strike price of $40 is priced a t $2.00 per share, while a call with a strike price of $40 is priced at $3 .50. What is the maximum per-share loss to the writer of the...
-
A bond with an annual coupon rate of 4.8% sells for $970. What is the bond's current yield?
-
a. The spot price of the U.S. dollar is currently C $ 1.35/US $. If the risk-free interest rate on 1-year government bonds is 4% in Canada and 6% in the United States, what must be the forward price...
-
If you were to design your own governance structure, how would you like to do it and why?
-
During the year, TRC Corporation has the following inventory transactions. Date January 1 Transaction Beginning inventory April 7 Purchase July 16 Purchase October 6 Purchase Number of Unit Total...
-
What training ideas would you propose to engage and motivate today's healthcare employees?
Study smarter with the SolutionInn App