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What is the percentage earned on the investment?


an investor bought on margin 100 shares of Copier Corp. for $84 a share. the firm paid an annual dividend of $4 a share; the margin requirement was 60%. commission were $75 to purchase and $75 to sell. the price of the stock rose to 120 and the investor sold.

Buy: 100 x 84 =8400
Sell: 100 x (120+4) = 12400
Gain: 12400 - 8400 = 4000
Cost: 60% x 100 x 84 + 2*150 = 5190

Percentage earned: 4000/5190 = 77.1%

I think this answer is not correct. In the Cost section, why does he multiply 150 times 2? Report It

Cost basis is 100*84*0.6 - 75 = 4965
Loan on margin is 100*84*0.4 = 3360
When you sell, you receive 100*120 - 75 = 11925, or 8565 after repaying the loan, for a net gain of 3600
Return = 3600/4965 = 72.5% (rounded)
Adjust your net gain by dividends received and margin interest paid. Report It

Rats! Just realized Cost Basis is $5115. Should have added 75, not subtracted. Net gain is 3450. Return = 3450/5115 = 67.4487% without the dividend and margin interest adjustments as required based on the holding period. Report It

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