You have a $50,000 portfolio. You are considering levering it -- borrowing $25,000 to increase...
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Finance
You have a $50,000 portfolio. You are considering levering it -- borrowing $25,000 to increase the investment to $75,000. You can borrow at 5%. Answer the following questions in the text box below.
1) Suppose the unlevered investment earns 10% and 5% interest is rolled into your debt. What are your assets, liabilities, and equity (equity = net portfolio value)? What was your return on your $50,000?
2) Repeat part (1) assuming the unlevered investment loses 10%.
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