Question: Youve just opened a margin account with $20,000 at your local brokerage firm. You instruct your broker to purchase 850 shares of Landon Golf stock,

Youve just opened a margin account with $20,000 at your local brokerage firm. You instruct your broker to purchase 850 shares of Landon Golf stock, which currently sells for $99 per share. Suppose the call money rate is 5 percent and your broker charges you a spread of 1.5 percent over this rate. You hold the stock for 3 months and sell at a price of $106 per share. The company paid a dividend of $.63 per share the day before you sold your stock. What is your total dollar return from this investment? What is your effective annual rate of return?

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