Mark Would Like to Purchase a Stock Priced at $70

question 33

Multiple Choice

Mark would like to purchase a stock priced at $70. The stock is not expected to pay any dividends in the coming year. Mark can either put up the entire amount and purchase the stock, or borrowhalf of the investment amount from his brokerage firm at an annual interest rate of 12 percent and put up the remainder. Mark thinks he can sell the stock for $100 after one year. If Mark borrows from his brokerage firm, his estimated return on the stock would be ____ percent.

• A) 42.86
• B) 85.71
• C) 73.71
• D) 30

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Definitions:

Sherman Antitrust Act

A landmark federal statute in the United States passed in 1890 aimed at preserving competitive markets by prohibiting monopolies and restraint of trade.

Federal Legislation

Laws enacted by the national government that apply to the entire country.

Federal Trade Commission Act

A United States federal law established in 1914 to prevent unfair competition and deceptive practices in the marketplace, creating the Federal Trade Commission.

Robinson-Patman Act

A United States federal law enacted in 1936 to prohibit anticompetitive practices by producers, specifically price discrimination.