What is the customer expected return

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Reference no: EM13921597

A broker wants to sell a customer an investment costing $100 with an expected payoff in one year of $104. The customer indicates that a 7% return is not very attractive. The broker responds by suggesting the customer borrow $80 for one year at 3% interest to help pay for the investment.

What is the customer’s expected return if she borrows the money? Does borrowing the money make the investment more attractive?

Reference no: EM13921597

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