A broker wants to sell a customer an investment costing $100 with an expected payoff in...
A broker wants to sell a customer an investment costing $100 with an expected payoff in one year of $109.8. The customer indicates that a 9.8 percent return is not very attractive. The broker responds by suggesting the customer borrow $80 for one year at 7.8 percent interest to help pay for the investment.
a. What is the customer’s expected return if she borrows the money? (Round your answer to 1 decimal place.)
Homework Answers
The expected return is calculated below:
Expected return is 17.80%.
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A broker wants to sell a customer an investment costing $100
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