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 increases by 20 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. 10 percent
B. 15 percent
C. 20 percent
D. 30 percent

ANSWER:

D. 30 percent