At the Beginning of 2010,Sally Purchased Besham Stock on Margin

question 21

Multiple Choice

At the beginning of 2010,Sally purchased Besham stock on margin.The initial margin requirement is 60 percent and the broker loan rate is 10 percent.Sally invested $15,000 of her own funds and margined the maximum amount allowed by the broker to purchase Besham stock.At the time,the purchase price of the stock was $50 a share.No dividends were paid during the year,and the stock was sold for $48 a share at the end of the 2010.What is the one-year holding period return for this investment?

• A) 60.0%
• B) 10.0%
• C) 4.0%
• D) 6.7%
• E) 0.0%

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Definitions:

Trend Adjustment

A statistical technique used to correct or adjust data to account for systematic patterns or trends over time, improving the accuracy of forecasts.

Alpha

Often refers to the coefficient in statistical models representing the intercept or in finance, a measure of investment performance on a risk-adjusted basis.

Beta

A measure of a stock's volatility in relation to the overall market.

Regression Equation

A mathematical formula used to predict a value of a dependent variable based on the values of one or more independent variables, often utilized in statistical analysis for forecasting and prediction.