Assume that you can buy U.S. Coal for $20 per share, either paying cash or buying on margin. The initial margin requirement is 50 percent, and the maintenance margin is 30 percent. U.S. Coal pays $0.25 per share in annual dividends. The margin interest cost is 6 percent. Using the spreadsheet format illustrated, calculate the gain or loss on both a cash basis and on a margin basis for 100 shares assuming possible ending prices for the stock as illustrated. The projected holding period is 6 months. Also calculate the percentage gain or loss on the initial investment for both a cash basis and a margin basis. Note that the holding period is expressed as part of a year in decimal form (e.g., 3 months = 0.25). Dividends are assumed to be paid quarterly. Thus, if the holding period is 3 months, and the annual dividend is $40, the dividend for the holding period is $10. Ignore tax considerations.
b. If you buy 500 shares instead of 100 shares, with all other parameters the same, would the percentage return on investment change?