a)
-10.38%
b)
-12.84%
c)
-10.95%
d)
21.84%

e)
28.38%
(a)
15
Suppose you buy a round lot of HS Inc. stock on 55% margin when it is
selling at $40 a share.
The broker charges a 10 percent annual interest rate and
commissions are 4 percent of the total stock value on both the purchase and the sale.
If at
year end you receive a $0.90 per share dividend and sell the stock for 35 5/8, what is your
rate of return on the investment?
a)
-35.17%
b)
-21.84%
c)
14.74%
d)
21.84%
e)
35.17%
(a)
16
Suppose you buy a round lot of Altman Industries stock on 50% margin
when it is selling at $35 a share.
The broker charges a 10 percent annual interest rate and
commissions are 5 percent of the total stock value on both the purchase and the sale.
If at
year end you receive a $1.00 per share dividend and sell the stock for $42.63, what is
your rate of return on the investment?
a)
15.58%
b)
11.84%
c)
14.74%
d)
21.84%
e)
28.38%
USE THE FOLLOWING INFORMATION FOR THE NEXT TWO PROBLEMS
You decide to sell short 200 shares of XCorp stock at a price of $75. Your margin deposit is 65
percent. Commission on the sale is 1.25%.
While you are short, the stock pays a $1.75 per share
dividend. Interest on margin debt is 5.25% per year.
(c) 17
At the end of one year you close out your short position by purchasing
share of
XCorp at $45 per share. The commission is 1.25%. What is your rate of return on
the investment?

a)
-55.92%
b)
10.31%
c)
51.06%
d)
23.1%
e)
-33.05%
(a)
18
Suppose at the end of one year XCorp is selling at $90 per share and you
cover
your short position at this price. What is your rate of return on the investment?
(Assume a 1.25% commission on the purchase)
a)
-40.64%
b)
-25.53%
c)
5.21%
d)
72.7%
e)
–71.2%
USE THE FOLLOWING INFORMATION FOR THE NEXT FIVE PROBLEMS
Shares of RossCorp stock are selling for $45 per share. Brokerage commissions are 2% for
purchases and 2% for sales. The interest rate on margin debt is
6.25% per year. The maintenance margin is 30%.
(e) 19
At the end of one year shares of RossCorp stock are selling for $55 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)
18.08%
b)
23.51%
c)
22.32%
d)
14.96%
e)
19.28%
(b) 20
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%
b)
-23.42%
c)
23.42%
d)
33.05%

e)
–25.35%
(c) 21
At the end of one year shares of RossCorp stock are selling for $55 per
share and
the company paid dividends of $0.85 per share. Assuming that you borrowed 25%
of cost of the purchase, what is your rate of return?
a)
-23.51%
b)
29.35%
c)
23.51%
d)
5.21%
e)
10.06%
(b) 22
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 borrowed 25%
of cost of the purchase, what is your rate of return?
a)
33.05%
b)
-33.05%
c)
-23.51%
d)
-25.35%
e)
–40.64%
(d)
23
Assume that you purchase 150 shares of RossCorp stock at $45
each by making a margin deposit of 55%. At what price would you receive a margin call?