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Two investors have invested in shares that most likely will perform the same as the S&P/ASX 200 index. Investor Alpha has invested using $100,000 of
Two investors have invested in shares that most likely will perform the same as the S&P/ASX 200 index. Investor Alpha has invested using $100,000 of his own money. Investor Beta has invested using $100,000, of which $40,000 has come from a margin loan. Estimate each investor's return on equity if the market, as measured by the S&P/ASX 200 index, falls 20%.
A) Alpha return on equity(2 marks)
B) Beta return on equity(4 marks)
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