USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 16

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Shares of RossCorp stock are selling for $45 per share. Brokerage commissions are 2 percent for purchases and 2 percent for sales. The interest rate on margin debt is 6.25 percent per year. The maintenance margin is 30 percent.
-Refer to Exhibit 3.7. At the end of one year, shares of RossCorp stock are selling for $35 per share and the company paid dividends of $0.85 per share. Assuming that you paid the full cost of the purchase, what is your rate of return if you sell RossCorp stock?

• A) -33.05 percent
• B) -23.42 percent
• C) 23.42 percent
• D) 33.05 percent
• E) -25.35 percent

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Definitions:

False Consensus Effect

The cognitive bias where a person overestimates the extent to which their beliefs, values, or behaviors are normal and shared by others.

Theory of Mind

The ability to attribute mental states—beliefs, intents, desires, emotions—to oneself and others and to understand that others have beliefs and perspectives different from one's own.

Fundamental Attribution Error

The inclination to place excessive focus on personal characteristics while undervaluing the impact of environmental conditions in interpreting the actions of others.

Individualism

A cultural orientation that values the independence, autonomy, and self-interest of individuals over groups or collectives.