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You buy $1,000 worth of stock with $500 of your own money and $500 borrowed from your broker at 6 percent annual interest. The stock increases in value, and you sell it after 60 days for $1,500. Your broker’s commission to buy and sell is $200. What is your total profit?

Respuesta :

prasanna2
price of stock = 1000
selling price= 1500
commission = 200
interest rate = 6%
loan = 500
just writting the information above as it help to simplify

interest rate for per month = 6% divided by 12= 0.5%
interset amount per month= .5% of 500= 2.5
interest for two month=5
total cost = 1000 plus 200 plus 5
total revenue or selling rice = 1500
profit= revenue minus cost= 295
Cricetus

The total profit will be "$295".

Given:

Sale price,

  • SP = $1500

Purchase price,

  • PP = $1000

Loan amount,

  • L = $500

Interest rate,

  • I = 6%

Period,

  • P = 60 days

           = [tex]\frac{60}{360} \ years[/tex]

Commission,

  • C = $200

→ The interest expense will be:

= [tex]L\times I\times P[/tex]

= [tex]500\times 6 \ percent\times \frac{60}{360}[/tex]

= [tex]5[/tex]

hence,

→ The total profit will be:

= [tex]SP -PP-Interest \ expense-C[/tex]

By substituting the values, we get

= [tex]1500-1000-5-200[/tex]

= [tex]295[/tex] ($)

Thus the above answer is right.

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