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Investor X puts up $10,000 but borrows an equal amount of money from her broker to double the amount invested to $20,000. The broker charges
Investor X puts up $10,000 but borrows an equal amount of money from her broker to double the amount invested to $20,000. The broker charges 8% interest on the loan. The stock was originally purchased at $10 per share and in one year, Investor X sells the stock for $12. Investor Y does not believe in borrowing to buy shares and invests $20,000 of his own money in the same stock. What is the difference in rate of return between Investor X and Investor Y?
1) 0%
2) 2%
3) 6%
4) 12%
5) None of the above
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