Suppose that TSLA’s current share price is $20. You buy 1,000 shares using $15,000 of your own money, borrowing the remainder of the purchase price from your broker. Assume that the annual rate on the margin loan is 10%. What is the rate of return if you sell your TSLA shares after 1 year at $22? Assume that TSL

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter7: Common Stock: Characteristics, Valuation, And Issuance
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  1. Suppose that TSLA’s current share price is $20. You buy 1,000 shares using $15,000 of your own money, borrowing the remainder of the purchase price from your broker.

    Assume that the annual rate on the margin loan is 10%. What is the rate of return if you sell your TSLA shares after 1 year at $22? Assume that TSLA pays no dividends.

       

    5%

       

    10%

       

    15%

       

    20%

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