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.