You bought 1000 shares of ABC Stock on margin
You bought 1000 shares of ABC Stock on margin at the beginning of April 2012 at $4.80 per share. You deposited a 50% margin which was higher than the initial margin of 40%. The prime rate of interest was 2.5% and your broker charged 125 basis points above the prime rate on margin loan. The stock paid a cash dividend of $0.12 per share in Feb and Aug. Your broker charged a flax fee of $7.95 per trade.A) What was your EAR if you sold the stock for $6.12 at the end of the year?B) What was your EAR if you did not borrow from your broker?
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