An Investor Borrows 20% of the Funds to Buy a Stock

question 66

Multiple Choice

An investor borrows 20% of the funds to buy a stock at a price of $100. If the price falls to 50, his or her effective rate of return is

• A) -20% + borrowing costs.
• B) -50% + borrowing costs.
• C) -62.5% + borrowing costs.
• D) -66.6% + borrowing costs.

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Definitions:

Positive Reinforcement

A technique in behavior modification that involves the introduction of a desirable stimulus after a behavior to increase the likelihood of that behavior being repeated.

Learned Helplessness

A psychological condition where an individual learns to feel powerless and unable to avoid negative situations due to previous experiences of failure to do so.

Shocks

Sudden and often violent disturbances or fluctuations in physical or emotional states, or electrical discharges used in medical therapy or experimental research.

Barriers

Obstacles or structures that impede progress, communication, or physical movement in various contexts.