A. Margin Trading (continued)

• c. Suppose now you use margin and can borrow an additional $2000 with a one year interest charge of $300. You can now buy 80 shares ($4000/$50). Again assume that the price of the stock increases to $60 per share.
  • Profit = $4800 - $2300(brokers) - $2000 = $500
  • Return = $500/$2000 = 25%

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