Which of the following would offer the best return on investment? Assume that you buy $5,000 in stock in all three cases, and ignore interest and transaction costs in all your calculations. Also assume that decimal number of stocks can be bought so all the amount discussed is invested into the stocks in all three cases. Buy a stock at $90 without margin, and sell it a year later at $105. Buy a stock at $70 with 50% margin (50% loan), and sell it a year later at $85. Buy a stock at $65 with 25% margin (75% loan), and sell it a year later at $80
Which of the following would offer the best return on investment? Assume that you buy $5,000 in stock in all three cases, and ignore interest and transaction costs in all your calculations. Also assume that decimal number of stocks can be bought so all the amount discussed is invested into the stocks in all three cases. Buy a stock at $90 without margin, and sell it a year later at $105. Buy a stock at $70 with 50% margin (50% loan), and sell it a year later at $85. Buy a stock at $65 with 25% margin (75% loan), and sell it a year later at $80
Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
7th Edition
ISBN:9780357033609
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Chapter12: Investing In Stocks And Bonds
Section: Chapter Questions
Problem 1FPE: What makes for a good investment? Use the approximate yield formula or a financial calculator to...
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Which of the following would offer the best
- Buy a stock at $90 without margin, and sell it a year later at $105.
- Buy a stock at $70 with 50% margin (50% loan), and sell it a year later at $85.
- Buy a stock at $65 with 25% margin (75% loan), and sell it a year later at $80.
Alternative offers the best return on the investment.
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