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horrorfan [7]
3 years ago
5

If an account valued at $1,000 is leveraged 5:1, a 10% drop in the value of invested assets would cause the value of the account

to decrease by:
Business
1 answer:
Marina CMI [18]3 years ago
7 0

Answer:

A 10% drop in the value of invested assets would cause the value of the account to decrease by $500

Explanation:

Leverage is a way in which companies can use borrowed capital to use in an investment. The leverage stands to multiply the profits of the investments if the investment proves profitable, however if the investment registers a loss, the loss is also multiplied.

In our case;

Initial value of assets=$1,000

leverage=5:1

A 10% drop means;

Decrease in value of account before leverage=percentage drop×initial value of assets

Decrease in value of account before leverage=(10/100)×1,000=$100

If we apply a leverage of 5:1,

Account decrease after leverage=100×5=$500

A 10% drop in the value of invested assets would cause the value of the account to decrease by $500

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You have decided to buy a used car. The dealer has offered you two options: (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use
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<em>Therefore the amount of cash the car dealer would charge is $17,167</em>

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2 years ago
You are trying to decide whether to take a vacation. Most of the costs of the vacation (airfare, hotel, and forgone wages) are m
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What does the term rop stand for at u-haul?
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