You purchased 300 shares of common stock on margin for $60 per share. The initial margin is 60% and the stock pays no dividend. What would your rate of return be if you sell the stock at $45 per share

- 41.67%

Explanation:

For computing the rate of return first we have to compute the initial investment which is shown below:

= Number of shares * per share * initial margin percentage

= 300 shares * $60 per share * 60%

= $10,800

Now Loss on sale of common stock is

= (Selling price - purchase price) * number of shares purchased

= ($45 - $60) * 300 shares

= - $4,500

So the rate of return will be:

= Loss : Initial Investment

= - $4,500 : $10,800

= - 41.67%