Today,you Are Purchasing 100 Shares of Stock on Margin

question 37

Multiple Choice

Today,you are purchasing 100 shares of stock on margin.The purchase price per share is $35.The initial margin requirement is 70 percent and the maintenance margin is 30 percent.The call money rate is 4.5 percent and you are charged 1.6 percent over that rate.What will your rate of return be if you sell your shares one year from now for $37 a share? Ignore dividends.

• A) 5.55 percent
• B) 6.42 percent
• C) 7.18 percent
• D) 7.49 percent
• E) 8.03 percent

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Definitions:

External Auditors

Professionals who independently assess the financial statements of an organization to ensure their accuracy and compliance with applicable standards.

Investors

Individuals or entities that allocate capital with the expectation of receiving financial returns, often through the purchase of securities, real estate, or other investment vehicles.

Factory Overhead Costs

Indirect expenses related to the manufacturing process that cannot be traced directly to specific units produced, such as utilities and rent for the production facility.

Direct Materials Cost

The cost of raw materials and components used directly in the production of goods or provision of services, directly traceable to the finished product.