One year holding period


Problem:

Suppose you buy 400 shares of stock initially selling for $40. You borrow nothing from your broker: that is, the initial margin on your purchase is 0%.

Required:

Question 1: What is the total value of 400 shares the stock you purchase?

Question 2: What will be your rate of return if the stock price increases to $50 after a one-year holding period?

Question 3: What will be your rate of return if the stock price decreases to $30 after a one year holding period?

Note: Explain in detail.

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Accounting Basics: One year holding period
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