The shares of Ecobank Ghana Ltd (EGH) are currently trading at 7.50 per share on the Ghana
Question:
The shares of Ecobank Ghana Ltd (EGH) are currently trading at ₵7.50 per
share on the Ghana Stock Exchange (GSE). Ruth is bullish on EGH shares and
is considering buying 10,000 shares of EGH.
Ruth has a share dealing account with a broker, and is eligible to trade on
margin. Her broker charges brokerage commissions of 1.2% for purchases and
sales; initial margin deposit of 60% and a maintenance margin of 25%. The
interest rate on margin debt is 4% per annum.
Other costs for trading securities (purchases and sales) on the Ghana Stock
Exchange include: 35 basis points as GSE fees; 15 basis points as Securities
Exchange Commission fees; 15 basis points as Securities Depository fees; and 5
basis points as Market Development fees.
a. Assuming that Ruth paid the full cost of the purchase and the EGH paid
dividends of ₵0.80 per share during the year, what is her rate of return if at
the end of the year she sells the shares for:
i. ₵8.00 per share?
ii. ₵6.50 per share?
Introduction To Financial Accounting
ISBN: 978-0077138448
7th edition
Authors: Anne Marie Ward, Andrew Thomas