Assume Joe invests a total of $10,000 in a company—$5,000 of which is his own money and $5,000 of which he borrowed at a 10 percent interest rate. If the company’s stock value decreases by 5 percent in one year at which time Joe sells his shares of the stock, what is Joe’s rate of return on his investment?

A. −5 percent
B. −10 percent
C. −20 percent
D. −30 percent

ANSWER

C. −20 percent