Assume Joe Invests a Total of $10,000 in a Company

question 119

Multiple Choice

Assume Joe invests a total of $10,000 in a company - $5,000 of which is his own money and $5,000 which he borrowed at a 10% interest rate.If the company's stock value decreases by 5% in one year at which time Joe sells his shares of the stock, what is Joe's rate of return on his investment?

• A)−5% 
• B)−10% 
• C)−20% 
• D)−30%

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Definitions:

Shareholder

An individual or entity that owns shares in a company, giving them certain rights such as voting on corporate matters.

Civil Penalty

A fine or other penalty imposed by a civil court on an entity found to have committed a violation or infraction.

Inside Information

Privileged, non-public information about a corporation or its securities that could provide an unfair advantage if used in trading.

1934 Securities Exchange Act

U.S. legislation that governs the trading of securities, including the establishment of the SEC.