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Chapter 12 ___________________________ Market Microstructure and Strategies 1. When investors buy stock with borrowed funds, this is sometimes referred to as A) use of proxy. B) purchasing stock on margin. C) a margin call. D) a margin residual claim. ANSWER: B 2. Assume a stock is initially priced at $50, and pays an annual $2 dividend.? An investor uses cash to pay $25 a share and borrows the remaining funds at a 12 percent annual interest.? What is the return if the investor sells the stock for $55 at the end of one year? A) 50 percent B) 30 percent C) 10 percent D) 16 percent E