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Business, 22.04.2020 04:59 taetae83

You are buying stock A on margin (1,000 shares). The interest rate on the margin loan is 12% per year. At the initiation of your trade, the bid price is $98, and the ask price is $104. Moreover, the initial margin is set to be 70%, and the maintenance margin is set to be 40%. Your investment horizon is one year. Suppose that the stock price hits zero at the end of your investment horizon. Calculate the return on equity (ROE) at the end of your investment horizon.

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You are buying stock A on margin (1,000 shares). The interest rate on the margin loan is 12% per yea...

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