A Firm Requires an Investment of $20,000 and Will Return

question 40

Multiple Choice

A firm requires an investment of $20,000 and will return $25,000 after one year.If the firm borrows $10,000 at 7% what is the return on levered equity?

• A)43%
• B)29%
• C)37%
• D)39%

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Definitions:

Mutual Fund

An investment vehicle made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments.

State And Local Governments

The subdivisions of the federal government with their own specific powers and responsibilities, managing local affairs and providing public services.

Higher Interest Rate

An increased cost of borrowing money reflected in the percentage charged on the principal amount by lenders to borrowers.

Financially Shaky Corporations

Companies that are experiencing financial instability or distress, potentially leading to increased risk for investors and creditors.