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Math

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Purchased $10,000 in stock, invested $5000 of own money, borrowed remaining $5000 at 8% interest. Stock increases by 10%, what is the rate of the investor's return? I calculated 12%, is that correct?

  • Math -

    yes

  • Math -

    the value of the stock increased by $1,000 so sold for $11,000.
    The investor paid $10,000 + .08*5000 = $10,400
    So the investor made $600 on the out of pocket investment of $5,000
    (600/5000)*100 = 12 %

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