The price of Walmart stock is currently $39.23 and you decide to buy 200 shares on margin.
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Question:
The price of Walmart stock is currently $39.23 and you decide to buy 200 shares on margin. The inital margin is 60% and the broker's maintenance margin is 40%. The broker charges an effective interest rate of 6% on the margin loan.
Part A) How much money do you borrow if you borrow as much as possible?
Part B) After the 2 months, the stock price has changed to $36.17 and the stock has paid dividends of $1.58 per share. What is the new percentage margin in the account?
Part C) What is your effective annual return?
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