Prediction fizzles out-price of the shares decreases

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Reference no: EM131241412

You borrow $10,000 at a 5% interest rate and you have to pay back this loan within three months. You use this $10,000 and your initial $1,000 to purchase shares in the company.

a) Suppose that your prediction fizzles out. The price of the shares decreases by 30% after three months. After paying back your loan (including interest), what is your profit?

b) You would make zero profit on your investment (i.e., neither gain nor lose anything) if the price of the shares changed by _______ percent. Calculate this percentage change and clearly indicate if it is an increase or decrease in the price.

Reference no: EM131241412

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