# solution

Suppose you purchase 750 shares of stock at \$35 per share with an initial cash investment of \$13,125. The call money rate is 5 percent and you are charged a 1.5 percent premium over this rate. Ignore dividends.

a. Calculate your return on investment one year later if the share price is \$43. Suppose instead you had purchased \$13,125 of stock with no margin. What would your rate of return have been now? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

b. Calculate your return on investment one year later if the share price is \$35. Suppose instead you had purchased \$13,125 of stock with no margin. What would your rate of return have been now? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

c. Calculate your return on investment one year later if the share price is \$19. Suppose instead you had purchased \$13,125 of stock with no margin. What would your rate of return have been now? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

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