Answer to Question #163162 in Finance for Tila Masinge

Question #163162

An investor invests $10000 in stocks trading at $100. If the price for these shares goes up by 30% and ignoring dividends, what would be the investor’s expected rate of return? Assuming the investor borrows another $10000 from a broker and invests in the same stocks to buy more of the same shares and the margin loan interest is 9% per year, what will his rate of return be now if the stocks goes up by 30%, ignoring dividends, again ? Suppose the investor only borrows $5000 at the same interest rate of 9% per year, what will the rate of return be if the share price goes up by 30%? If it goes down by 30%, and if it remains unchanged? 


1
Expert's answer
2021-02-16T11:23:26-0500

When share price goes up by 30%

When share price goes up by 30%

When share price reduces by 30%

When share price remains unchanged

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