Question

At the beginning of 2005, Steve purchased ACME stock on margin. The initial margin requirement is 50 percent and the broker loan rate is 8 percent. Steve invested $15,000 of his own funds and margined the maximum amount allowed by the broker to purchase ACME stock. At the time, the purchase price of the stock was $25 a share. No dividends were paid during the year, and the stock was sold for $32 a share at the end of the 2005. What is the one-year holding period return for this investment?

Answer 1

$2,184