Allan Purchased 600 Shares of Stock on Margin for $41

question 59

Multiple Choice

Allan purchased 600 shares of stock on margin for $41 a share and sold the shares five months later for $42.50 a share. The initial margin requirement was 65 percent and the maintenance margin was 30 percent. The interest rate on the margin loan was 10 percent. He received no dividend income. What was his holding period return?

• A) 1.05 percent
• B) 3.45 percent
• C) 4.88 percent
• D) 7.50 percent
• E) 7.82 percent

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Definitions:

Type I Error

An incorrect decision to reject the null hypothesis when it is true.

Entertainment

Activities, performances, or other methods of providing pleasure and relaxation to audiences or participants.

Campus

The land and buildings belonging to a university, college, or educational institution where teaching and learning occur.

Null Hypothesis

A statement in statistical hypothesis testing that assumes no significant difference or effect exists between specified populations or parameters.