Consider an investment opportunity for Mary Smith that produces a 15 percent positive return if things go well but a 10 percent loss if things go poorly. To make a $100 investment, suppose that Mary takes advantage of leverage by using $20 of her own savings and $80 of borrowed money, which Mary can ge at zero percent interest. However, suppose that things go wrong and the investment returns only $90. This means that she will realize a on the $20 of her own savings: O 30 percent loss O 50 percent loss O 60 percent loss O 40 percent loss

Consider an investment opportunity for Mary Smith that produces a 15 percent positive return if things go well but a 10 percent loss if things go poorly. To make a $100 investment, suppose that Mary takes advantage of leverage by using $20 of her own savings and $80 of borrowed money, which Mary can ge at zero percent interest. However, suppose that things go wrong and the investment returns only $90. This means that she will realize a on the $20 of her own savings: O 30 percent loss O 50 percent loss O 60 percent loss O 40 percent loss

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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