Homework Answers
Initial Investment = No. of shares sold * Cost per share * Initial Margin Requirement
= 800 * $30 * 0.60 = $14,400
Loan Repayment = [No. of shares sold * Cost per share * (1 - Initial Margin Requirement)] * [1 + r]n
= [800 * $30 * (1 - 0.60)] * [1 + (0.012 + 0.049)]9/12
= $9,600 * 1.0454 = $10,035.93
Holding Period Dollar Return = Selling Price - Initial Investment - Loan Repayment
= $29,440 - $14,400 - $10,035.93 = $5,004.07
Holding Period Return = Dollar Return / Initial Investment
= $5,004.07 / $14,400 = 0.3475, or 34.75%
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