Tony Purchased 100 Shares of T-Rex Stock for $43 a Share

question 29

Multiple Choice

Tony purchased 100 shares of T-Rex stock for $43 a share. On the same day, Sam also purchased 100 shares of T-Rex stock for $43 a share. Tony paid cash for his purchase while Sam used margin. The initial margin requirement on this stock is 60% while the maintenance margin is 40%. Both Tony and Sam sold their shares after eight months at a price of $40 a share. The stock pays no dividends. Tony had a holding period percentage return of ________% as compared to Sam's ________% return. Ignore margin interest and trading costs.

• A)−4.19; −6.98
• B)−4.19; −11.63
• C)−6.98; −4.19
• D)−6.98; −11.63
• E)−11.63; −7.56

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Definitions:

Premium Tax Credit

A refundable tax credit designed to help eligible individuals and families with low or moderate income afford health insurance purchased through the Health Insurance Marketplace.

Household Income

The total gross income before taxes of all household members over a certain age, typically used for financial assessments.

American Opportunity Tax

A credit that allows taxpayers to reduce their federal income tax based on qualified education expenses paid for themselves, a spouse, or a dependent.

Lifetime Learning Credits

A tax credit available to students enrolled in eligible educational institutions, aimed at reducing tax liability for tuition and certain related expenses.