Barry purchased 1000 stocks of apple on 12 th September at the price of $3.80 per share
Question:
Barry purchased 1000 stocks of apple on 12th September at the price of $3.80 per share using the margin trading facility offered by his broker. The broker requires 50% initial margin and 40% maintenance margin. There are no transaction fees, and the broker charges no interest or fees for the margin trading facility. On 14th September, Barry sells the Apple stocks he purchased at the price of $3.6 per share.
Calculate the rate of return he earned as a percentage of his initial investment.
What would have been the rate return from Barry investment in Apple have had he not used the margin trading facility?
Based on your responses above, discuss the risks and the benefits of using margin trading strategy.
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill