Determine the investors expected return

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Reference no: EM133491970

Question: An investor buys 400 shares of stock selling at $30 per share using a margin of 50%. The stock pays annual dividends of $1 per share. A margin loan can be obtained at an annual interest cost of 10%. The maintenance margin is 30%. Determine the investor's expected return if there is a 40% chance the stock price rises to $35 and a 60% chance the stock price decreases to $24 over the next 12 months.

Reference no: EM133491970

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