Question

# Suppose the call money rate is 4.5 percent, and you pay a spread of 2.5 percent...

Suppose the call money rate is 4.5 percent, and you pay a spread of 2.5 percent over that. You buy 900 shares of stock at \$46 per share. You put up \$24,840. One year later, the stock is selling for \$60 per share and you close out your position. What is your return assuming a dividend of \$0.23 per share is paid? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Rate of return

 Initial investment \$ 24,840.00 Amount borrowed \$ 16,560.00 =900*46-24840 Interest expense \$    1,159.20 =16560*(4.5%+2.5%) Dollar return \$ 11,647.80 =900*(60+0.23-46)-1159.2 Rate of return 46.89% =11647.8/24840

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