Emily DiDonato is considering buying stock on margin. She wants to buy $85,000 in stock; she...

Emily DiDonato is considering buying stock on margin. She wants to buy $85,000 in stock; she will put 30% down and borrow the remaining $59,500 at 10% interest.

(a) if Emily’s investment goes up by 45 percent after one year, and she pays off her loan, how much will she make in dollars? What percent rate of return does this represent?

(b) If Emily’s investment instead drops by 18 percent, how much will she lose in dollars? In terms of a percentage loss, how much will she lose?

Expert Solution

jeff jeffy answered 2 years ago

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