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?

Question

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?

De andra · Answer

yes

Damon · Answer

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 %