You purchased 100 shares of Highlight Company for $20 a share one year ago with a margin of 50%.The stock is currently selling for $28 a share and no dividends were ever paid.The broker charges an annual interest rate of 8% and a $100 commission on both the purchase and sale of these shares.What is your annual rate of return on this investment?
A) 21%
B) 47%
C) 52%
D) 60%
E) 72%

Question

Quizplus · Accepted Answer

Annual Rate of Return = Profit/Initial Investment
 $$\begin{array}{l}
\text { Pront } = \text { Enfling Market } V \text { mue - Initial Stack } V \text { alue - Camninsians - Interest }\
= \left( 100 ^ { * } 29 \right) - \left( 100 ^ { * } + 20 \right) - \left( 2 ^ { * } 100 \right) - \left( 0.00 ^ { * } + 5 ^ { * } 100 ^ { * } 20 \right)\
= 12,800 - 12000 - 1200 - 180 = 1520
\end{array}$$ Annual Rate of Return = $520/(.50*100*$20)= 520/(1,000 + 100)= 0.47 or 47%

You Purchased 100 Shares of Highlight Company for $20 a Share