Assume that Michaela purchases $12,000 worth of a stock.To do so she uses $2,000 of her own money and borrows the remaining $10,000 at an 8.0% interest rate.If the stock's value increases by 20% in one year and she sells the stock at that time, what is her rate of return?

Question

Quizplus · Accepted Answer

Michaela's stock increases by 20%, so it's worth $14,400. She pays back the $10,000 loan plus $800 interest, totaling $10,800. Her profit is $14,400 - $10,800 - $2,000 = $1,600. Her rate of return is $1,600 / $2,000 = 80%.

Assume That Michaela Purchases $12,000 Worth of a Stock