Use the Information for the Question(s) Below

question 106

Multiple Choice

Use the information for the question(s) below.
Suppose you have $10,000 in cash and you decide to borrow another $10,000 at a 6% interest rate to invest in the stock market. You invest the entire $20,000 in an exchange traded fund (ETF) with a 12% expected return and a 20% volatility.
-Assuming that the EFT you invested in returns -10%,then the realized return on your investment is closest to:

• A) -20%
• B) -10%
• C) -24%
• D) -26%

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Definitions:

Revenue Sharing

The distribution of a portion of a company's profits to its partners or other stakeholders in a project or venture.

Mutual Funds

Investment ventures supported by shareholder capital, dealing in a wide array of holdings and managed by experts.

Gross Return

The total return on an investment before any deductions, such as fees, costs, or taxes, are made.

Expense Ratio

A measure of the cost of operating a mutual fund, calculated as a percentage of the fund's total assets.