Ignoring borrowing costs, an investor who borrows half the funds to invest in an asset that rises from $200 to $300 makes an effective rate of return of
A) 30%.
B) 50%.
C) 100%.
D) 300%.

Question

Quizplus · Accepted Answer

The investor's initial equity is $100 (half of the $200 investment), and the profit is $100 ($300 final value - $200 initial value). The rate of return is calculated as profit divided by initial equity, which is $100/$100 = 100%.

Ignoring Borrowing Costs, an Investor Who Borrows Half the Funds