What is the rate of return on the margin trade

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Reference no: EM131841109

A trader opens a brokerage account, and purchases 300 shares of Internet Dreams at $40.00 per share. She borrows $4,000 from her broker to help pay for the purchase. The broker's call money rate on the loan is 4.00% annually.

1) What is the margin in the account when she first purchases the stock?

2) if the share price falls to $30.00 per share by the end of a year, what is the remaining margin in her account? (Don't forget to include the impact of the broker's call money rate).

3) What is the rate of return on the margin trade?

Reference no: EM131841109

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