when to apply leverage ratio to rate of return?

CFA Level I Equities
#1

Jason Williams purchased 500 shares of a company at $32 per share. The stock was bought on a 75% margin. One month later, Williams had to pay interest on the amount borrowed at a rate of 2% per month. At the time, Williams received a dividend of $0.50 per share. Immediately after he sold the shares at $28 per share. He paid commissions of $10 on the purchase and $10 on the sale of the stock. What was the rate of return on this investment for one month?

A. -12.5%

B. 15.4%

C. -50.1%

In this case, why we did not apply the leverage ratio to the rate of return (15.4%)? As the stock was bought on 75% margin (Equity/Asset), so the leverage ratio is 1.33 (1/75%)?

Thanks in advance!

#2

Because there are costs.

And the return’s negative, not positive.

#3

Sorry, that was a typo.

Does it mean under the case including costs like interest costs, we calculate return and the return is no need to multiply the leverage ratio? How could this happen? Because I think the leverage is used to magnify returns and losses?

Thanks very much!