Question

You invested $5000 of your own money and borrowed $5000 from your broker to purchase shares of a company trading at a share price of $2. You paid 10% interest on your borrowed money for one year. You sold the stock one year later for $1.72. How much money in total did you lose on this transaction including the interest you paid?

Answer 1

$1200

Step-by-step explanation:

buy shares. $ 5000 / $ 2 = 2500 shares.

then you sell them

2500 shares x $ 1.72 = $ 4,300

the loss in this investment was $ 5,000- $ 4,300 = $ 700

You must also pay interest on the loan.

$ 5,000 x% 10 = $500

Total loss $ 700 + $ 500 = $ 1,200

which equals 24% = $ 1,200 / $ 5,000