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Investor A makes a cash purchase of 200 shares of AB&C common stock for $60 a share. Investor B also buys 200 shares of AB&C but uses margin. Each holds the stock for one year, during which dividends of $6 a share are distributed. Commissions are 3 percent of the value of a purchase or sale; the margin requirement is 60 percent, and the interest rate is 10 percent annually on borrowed funds.

A. What is the percentage earned by investor A if he or she sells the stock after one year for $45? Round your answer to one decimal places.

%

What is the percentage earned by investor B if he or she sells the stock after one year for $45? Round your answer to one decimal places.

%

B. What is the percentage earned by investor A if he or she sells the stock after one year for $60? Round your answer to one decimal places.

%

What is the percentage earned by investor B if he or she sells the stock after one year for $60? Round your answer to one decimal places.

%

C. What is the percentage earned by investor A if he or she sells the stock after one year for $65? Round your answer to one decimal places.

%

What is the percentage earned by investor B if he or she sells the stock after one year for $65? Round your answer to one decimal places.

%

D. What is the percentage earned by investor A if he or she sells the stock after one year for $75? Round your answer to one decimal places.

%

What is the percentage earned by investor B if he or she sells the stock after one year for $75? Round your answer to one decimal places.

%

Now the question changes

If the margin requirement had been 40 percent, what would have been the annual percentage returns?

A. What is the percentage earned by investor A if he or she sells the stock after one year for $45? Round your answer to one decimal places.

%

What is the percentage earned by investor B if he or she sells the stock after one year for $45? Round your answer to one decimal places.

%

B. cWhat is the percentage earned by investor A if he or she sells the stock after one year for $60? Round your answer to one decimal places.

%

What is the percentage earned by investor B if he or she sells the stock after one year for $60? Round your answer to one decimal places.

%

C. What is the percentage earned by investor A if he or she sells the stock after one year for $65? Round your answer to one decimal places.

%

What is the percentage earned by investor B if he or she sells the stock after one year for $65? Round your answer to one decimal places.

15% (I got this one right I am not sure how)

D. What is the percentage earned by investor A if he or she sells the stock after one year for $75? Round your answer to one decimal places.

%

What is the percentage earned by investor B if he or she sells the stock after one year for $75? Round your answer to one decimal places.

%

Please show your work I want to learn this. Honestly if you just show me how to do the first few of both sections (part 1 &2) it would be greatly appreciated and help me learn this for my test later in the semester.

Financial Management, Finance

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