You purchase 100 shares for $50 a share ($5,000), and after a year the price rises to $60. What will be the percentage return on your investment if you bought the stock on margin and the margin requirement was (a) 25 percent, (b) 50 percent, and (c) 75 percent? (Ignore commissions, dividends, and interest expense.

a. Margin requirement = 25%

Investment amount = $5000

Own investment = $5000*25% = $1250

Borrowed amount = $5000 - $1250 = $3750

Sale amount = $6000

Profit = Sale amount - Invested amount = $6000 - $5000 = $1000

Profit % = Profit/Own investment = 1000/1250 = 80%

b. Margin requirement = 50%

Investment amount = $5000

Own investment = $5000 * 50% = $2500

Borrowed amount = $5000 - 2500 = $2500

Sale amount = $6000

Profit = Sale amount - Invested amount = $6000 - $5000 = $1000

Profit % = profit/own investment = 1000/2500 = 40%

c. Margin requirement = 75%

Investment amount = $5000

Own investment = $5000*75% = $3750

Borrowed amount = $5000 - $3750 = $1250

Sale amount = $6000

Profit = Sale amount - Invested amount = $6000 - $5000 = $1000

Profit % = profit/own investment = 1000/3750 = 26.67%

Absolute scarcity: First, it may be that there are simply insufficient quantities of a resource to meet human needs or wants. ... Relative scarcity: Second, there may be physical quantities of a resource present but scarcity exists because of problems about supply or distribution.Jan 19, 2012

Explanation: