An investor borrows half the funds to buy a stock at a price of $100. If the price falls to $80, his or her effective rate of return is

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The investor borrows half the funds, so for a $100 stock, $50 is borrowed and $50 is their own money. When the price falls to $80, the loss is $20 on the $50 of their own money invested, which is a 40% loss ($20 loss / $50 own investment). Borrowing costs would be additional to this loss.

An Investor Borrows Half the Funds to Buy a Stock