Part A)

Example: An investor purchases 100 shares of a stock at $100 per share using $5,000 of her own money and borrows $5,000 at the interest rate of 5% per month. The stock price rises to $130 per share (ignoring any dividends) in a month. What is the return on equity?

Part B)

An investor puts up $5,000 but borrows an equal amount of money from his broker to double the amount invested to $10,000. The broker charges 7% on the loan. The stock was originally purchased at $25 per share, and in 1 year the investor sells the stock for $28. Whats the investor's rate of return?