Sushil purchased 1,000 shares of National Insurance Company stock on margin at the beginning of the year for Rs 200 per share. Initial margin…
BBS Fundamentals of Investment · 2082 · Solved Question with Answer
Sushil purchased 1,000 shares of National Insurance Company stock on margin at the beginning of the year for Rs 200 per share. Initial margin requirement was 50%. Sushil paid 10% interest on the margin loan and never faced a margin call. National Insurance paid dividends of Rs. 10 per share during the year.
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a. At the end of year, if Sushil sold National Insurance stock for Rs. 300 per share, What would Sushil 's rate of return be for the year?
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b. At the end of year, if Sushil sold stock for Rs. 150 per share, what would Sushil 's rate of return be for the year?
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c. Recalculate your answers to part (a) and part (b) assuming that Sushil made stock purchase for cash instead of on margin.