You have purchased 15 shares of company DIY for $52 with 65% initial margin. The interest...
You have purchased 15 shares of company DIY for $52 with 65% initial margin. The interest on the margin loan is 6%. How much is your return on your investment, if 3 months later DIY's price is $45? (Provide your answer in percentage rounded to two decimals, omitting the % sign)
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Homework Answers
Current Price = $ 52, Number of Shares Bought = 15, Total Worth of Purchase = 15 x 52 = $ 780
Initial Margin = 65 % of Purchase Value = 0.65 x 780 = $ 507
Borrowing = Purchase Value - Initial Margin = 780 - 507 = $ 273
Interest On Margin = 6 % of Borrowing = 0.06 x 273 = $ 16.38
Price of Shares after 3 months = $ 45
Portfolio Value after Three Months = 45 x 15 = $ 675
Return Value on Investment = 675 - 507 - 16.38 - 273 = - $ 121.38
Return on Investment = (-121.38/507) x 100 = - 23.94 %
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