Question

Calculating the return on investment using financial leverage. suppose Dave invested only 20,000 of his own money and borrowed 180,000 interest-free from his rich father. what was his return on investment?

Answer 1

by borrowing 180,000 it increased his initial capital to 200,000 which was 10 times more than his personal investment
so his rate of return will be 10 times greater than whatever the return is on the 200,000
Example: after investing , lets say he earned 10% over next year
he now has 220,000, after paying back the 180,000 he borrowed he is left with 40,000
he doubled his money...which means he earned 100%

Answer 2

ok thank u