You bought 1000 shares of ABC stock on margin at the beginning of April 2012 at $4.80 per share. You deposited a 50% margin which was higher than the initial margin of 40%. The prime rate of interest was 2.5% and your broker charged 125 basis points above the prime rate on margin loan (assume simple interest rate). The stock paid a cash dividend of $0.12 per share in February and August of 2012. Your broker charged a flat fee of $7.95per trade.

1) What was your EAR if you sold the stock for $6.12 at the end of the year?

Answer rating: 100% (QA)

To solve this problem we need to calculate the expected value of earnings per share EPS afte... View the full answer