### Investment Return CalculationA broker wants to sell a customer an investment costing $100 with an expected payoff in one year of $108.6. The customer indicates that an 8.6 percent return is not very attractive. The broker responds by suggesting the customer borrow $80 for one year at 6.6 percent interest to help pay for the investment.**Problem Statement:**- **Question:** What is the customer's expected return if she borrows the money? (Round your answer to 1 decimal place.)**Calculation:**- **Cost of Investment:** $100- **Expected Payoff (in one year):** $108.6- **Amount Borrowed:** $80- **Interest Rate on Borrowed Amount:** 6.6%**Steps:**1. **Interest Calculation:** \[ \text{Interest} = 80 \times \frac{6.6}{100} = \$5.28 \]2. **Total Amount to Repay:** \[ \text{Total Repayment} = 80 + 5.28 = \$85.28 \]3. **Customer’s Own Money Invested:** \[ \text{Own Money} = 100 - 80 = \$20 \]4. **Net Proceeds:** \[ \text{Net Proceeds} = 108.6 - 85.28= \$23.32 \]5. **Expected Return:** \[ \text{Expected Return} = \frac{Net Proceeds}{Own Money} \times 100 = \frac{23.32}{20} \times 100 = 116.6\% \]### Answer**Customer's expected return**: $116.6\%$

Answer:- Expected return meaning:- The expected return can be defined as the profit or loss an…

A broker wants to sell a customer an investment costing $100 with an expected payoff in one year of $108.6. The customer indicates that a 8.6 percent return is not very attractive. The broker responds by suggesting the customer borrow $80 for one year at 6.6 percent interest to help pay for the investment. a. What is the customer's expected return if she borrows the money? (Round your answer to 1 decimal place.) Customer's expected return %

A broker wants to sell a customer an investment costing $100 with an expected payoff in one year of $108.6. The customer indicates that a 8.6 percent return is not very attractive. The broker responds by suggesting the customer borrow $80 for one year at 6.6 percent interest to help pay for the investment. a. What is the customer's expected return if she borrows the money? (Round your answer to 1 decimal place.) Customer's expected return %

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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