Financial Marketing

You’ve just opened a margin account with $13,000 at your local brokerage firm. You instruct your broker to purchase 600 shares of Landon Golf stock, which currently sells for $82 per share. Suppose the call money rate is 7 percent and your broker charges you a spread of 1 percent over this rate. You hold the stock for 4 months and sell at a price of $90 per share. The company paid a dividend of $.44 per share the day before you sold your stock.

 

1. What is your total dollar return from this investment? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the “$” sign in your response.)

 

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  Dollar return $

 

2. What is your effective annual rate of return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the “%” sign in your response.)

 

  Effective annual return  %