An investor puts up $5 000 but borrows an equal amount of money from their broker to double the amount invested to $10 000. The broker charges 7% on the loan. The shares were originally purchased at $25 per share and in one year the investor sells the shares for $28. The investor's rate of return was ________.

Question

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The investor's rate of return is calculated as follows:Rate of return = (Profit / Investment) * 100Profit = (Selling price per share - Purchase price per share) * Number of sharesInvestment = Initial investment + Loan amountNumber of shares = Total investment / Purchase price per shareSelling price per share = $28Purchase price per share = $25Initial investment = $5,000Loan amount = $5,000Total investment = $10,000Number of shares = $10,000 / $25 = 400 sharesProfit = ($28 - $25) * 400 = $1,200Rate of return = ($1,200 / $10,000) * 100 = 12%

An Investor Puts Up $5 000 but Borrows an Equal