Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Finance
You've just opened a margin account with $20,000
at your local brokerage firm. You instruct your
broker to purchase 500 shares of Landon Golf
stock, which currently sells for $60 per share.
Suppose the call money rate is 5% and your broker
charges you a spread of 1.25% over this rate. You
hold the stock for 6 months and sell at a price of
$65 per share. The company paid a dividend of
$0.25 per share the day before you sold your stock.
1) What is your total dollar return from this
investment?
2) What is your effective annual rate of return?
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Transcribed Image Text:Finance You've just opened a margin account with $20,000 at your local brokerage firm. You instruct your broker to purchase 500 shares of Landon Golf stock, which currently sells for $60 per share. Suppose the call money rate is 5% and your broker charges you a spread of 1.25% over this rate. You hold the stock for 6 months and sell at a price of $65 per share. The company paid a dividend of $0.25 per share the day before you sold your stock. 1) What is your total dollar return from this investment? 2) What is your effective annual rate of return?
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