Kizspy Question: 18
(Choose 1 answer)
RUBVERT LOW LOM
Exhibit 12-1
Mark would like to purchase a stock priced at $70. The stock is not expected to pay any dividends in the
coming year. He can either put up the entire amount and purchase the stock, or borrow $35 from his
brokerage firm at an annual interest rate of 12 percent and put up the remainder. Mark thinks he can sell the
stock for $100 after one year.
Refer to Exhibit 12-1. If Mark does not borrow any money from his brokerage firm, what is the estimated
return on the stock?
A. 30.00 percent
B. -42.86 percent
C. -30.00 percent
D. 42.86 percent
