(Last Word) Suppose Balin has $100 to invest in an opportunity that returns, for every $100 invested, $120 if it goes well but only $80 if it goes poorly. If leverage allows Balin to borrow $90 for every $10 he invests, what are
His rates of proﬁt and loss, respectively, if he borrows the full amount to invest in the opportunity?
A) 20 percent proﬁt; 20 percent loss
B) 33.3 percent proﬁt; 50 percent loss
C) 200 percent proﬁt; 100 percent loss
D) 1,100 percent proﬁt; 100 percent loss

Question

Quizplus · Accepted Answer

If Balin borrows $900 and invests $1000, a successful outcome returns $1200, resulting in a $200 profit, which is a 200% profit on his $100 investment. If it goes poorly, he gets $800, losing his entire $100, which is a 100% loss.

(Last Word) Suppose Balin Has $100 to Invest in an Opportunity