Example:The Effects of Margin, I.

You haye $$30,000$ in a margin account; $60\%$ initial margin required.

You can buy $$50,000$ of stock with this account $($why$?).$

Your borrowing rate from your broker is $6\mathrm{.}00\%.$

Suppose you buy $1,000$ shares of Verizon $($VZ$),$ for $$50/$share$.$

Assume no dividends, and that your borrowing rate is still $6\mathrm{.}00\%,$ what is your return if:

In one year, VZ is selling for $$60$ per share?

In one year, VZ stock is selling for $$60$ per share, but you did not borrow money from your broker?