Lender's Expected Payoff from a Risky Loan

Formula for Rate of Return on a Loan

General Formula for Rate of Return on Any Asset or Investment

An individual lends a friend $500. After one year, the friend repays the entire loan along with an additional $40. What was the rate of return on this loan for the individual who lent the money?

Investment Decision Analysis

Explaining Investment Profitability

An investor buys an asset for $150 and sells it one year later for $165. True or False: The rate of return on this investment is 10%.

Match each term related to calculating the profitability of an investment with its correct description.

An investor purchases a share of stock for $2,000. One year later, the investor sells the stock for $2,150. The rate of return on this investment is ____%. (Please provide the numerical value only.)

You are given the initial purchase price of an asset and the final price at which it was sold. Arrange the following steps in the correct logical order to determine the asset's rate of return.

Analyzing Investment Scenarios

An investor is evaluating two separate investments made over the same time period.

• Investment X: An initial cost of $200 results in a final value of $230.
• Investment Y: An initial cost of $500 results in a final value of $560.

Based on the concept of profitability as a proportional gain, which statement provides the most accurate comparison of these two investments?

Evaluating an Unprofitable Investment