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 stock was originally purchased at $25 per share and in one year the investor sells the stock for $28.The investor's rate of return was ____.

Question

Quizplus · Accepted Answer

The investor's gain is $3 per share on 400 shares, totaling $1,200. The interest on the $5,000 loan is $350. The net gain is $850. The rate of return is $850/$5,000 = 17%.

An Investor Puts Up $5,000 but Borrows an Equal Amount