Suppose an investment bank is buying $50 million in long-term mortgage-backed securities,and finances the investment by borrowing 80% and paying for the other 20% out of equity.What is the bank's return on its equity investment if the value of the mortgage-backed securities decreases by 20% during the year after they are purchased?
A) -25%
B) -40%
C) -50%
D) -100%
Correct Answer:
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