Compare investment alternatives
Response to the following problem:
You have two investment opportunities. One will have a 10% rate of return on an investment of $5,000; the other will have an 11% rate of return on principal of $7,000. You would like to take advantage of the higheryielding investment but have only $5,000 available.
Required:
What is the maximum rate of interest that you would pay to borrow the $2,000 needed to take advantage of the higher yield?