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Question: you long 1000 units of a stock at the end...

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You long 1,000 units of a stock. At the end of the first year you receive a dividend payment, and also sell 200 units of the stock after the dividend transaction has cleared. On the remaining long position, you receive a further dividend at the end of the second year. You then sell the remaining 800 units and the position is cleared. The prices and dividend payments are given below.

Initial stock price = 100

First year dividend = 5

Price at the end of year one = 110

Second year dividend = 5

Price at the end of year two = 80

You make the transaction on the basis of a 70% initial and maintenance margin requirement (implying you can borrow up to 30% of the required funds from the broker)

What is the two-year return on your long transaction?

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