An investor puts up $5,000 but borrows an equal amount of money from his broker to double the amount invested to $10,000. The broker charges 7% on the loan. The stock was originally purchased at $25 per share, and in 1 year the investor sells the stock for $28. The investor's rate of return was .

The investor's rate of return is 17%

Explanation:

The total amount invested was $10000,which implied 400shares($10000/25)

The investment was realized for $28 each and total proceeds is $28*400 i.e $11200

The investor has to pay interest of 7% on the $5000 borrowed

7%*$5000=$350

When the interest is taken away from the proceeds,$10,850 is left($11200-$350)

Hence, rate of return on investment is the return earned $850($10850-$10000) divided the initial cash provided by the investor($5000)

i.e $850/$5000*100=17%

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- rich people tend to have more capital in their disposal. this would benefit them in business since it is far easier for them to fund their business operation compared to poor people.