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Adam purchases 1,200 shares of Beta Inc

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Adam purchases 1,200 shares of Beta Inc. at $22 per share and sells them after 1 year, during which time the stock also pays a dividend. The following information is also available:

Sale price = $25

Leverage ratio = 2.5

Call money rate = 5%

Dividend = $0.20 per share

Commission = $0.03 per share

Maintenance margin = 20%

Assume that the interest on the loan and the dividend are both paid at the end of the year.

Adam’s gain attributable to leverage is closest to:

Group of answer choices

6.00%

34.09%

20.00%

Option 1

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