You bought 1000 shares of ABC stock on margin at the beginning of April 2012 at...

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You bought 1000 shares of ABC stock on margin at the beginningof April 2012 at $4.80 per share. You deposited a 50% margin whichwas higher than the initial margin of 40%. The prime rate ofinterest was 2.5% and your broker charged 125 basis points abovethe prime rate on margin loan (assume simple interest rate). Thestock paid a cash dividend of $0.12 per share in February andAugust of 2012. Your broker charged a flat fee of $7.95pertrade.
1) What was your EAR if you sold the stock for $6.12 at the endof the year?
2) what was your EAR if you did not borrow from hour broker?

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1)	Cost of Shares=1000*$4.80	$4,800
	Amount of margin deposited	$2,400	(50%*4800)
	Amount of Loan	$2,400
	Interest rate charged by broker=2.5+1.25	3.75%
	9 months (April-December) interest	$67.50	24003.75%(9/12)
	Broker Charges for two trades(buy and Sell)	$15.90	(7.95*2)
	Total amount to be paid to broker=2400+67.5+15.9	$2,483.40
	Initial Investment	$2,400
	Amount Received after 9 months=1000*$6.12	$6,120
	Dividend of August 2012=0.12*1000	$120.00
	Dividend of February will not be received by the investor
	Since Purchase was made in April 2012
	Total amount received	$6,240	(6120+120)
	Amount payable to broker	$2,483.40
	Net amount received	$3,756.60
	Effective Annual Return (EAR)=(3756/2400)-1	0.56525
	EAR	56.53%

2)	EAR if amount is not borrowed
	Investment =1000*4.8	$4,800
	Amount Received	$6,240
	Less:Brokerage	$15.90
	Net amount received	$6,224.10	(6240-15.90)
	EAR=(6224.10/4800)-1	0.2966875
	EAR if amount is not borrowed	29.67%

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You bought 1000 shares of ABC stock on margin at the beginningof April 2012 at $4.80 per share. You deposited a 50% margin whichwas higher than the initial margin of 40%. The prime rate ofinterest was 2.5% and your broker charged 125 basis points abovethe prime rate on margin loan (assume simple interest rate). Thestock paid a cash dividend of $0.12 per share in February andAugust of 2012. Your broker charged a flat fee of $7.95pertrade.1) What was your EAR if you sold the stock for $6.12 at the endof the year?2) what was your EAR if you did not borrow from hour broker?