Here is the following scenario for a 1 year investment:   Pu…

Here is the following scenario for a 1 year investment:   Purchase stock: $100 Equity invested: $80 Debt: $10 Interest Payments: $1 (10% interest) Sales price after 1 year: $150   If the leverage ratio were to decrease would the rate of return for the year increase or decrease? Why?

Suppose we have the following real estate speculation scenar…

Suppose we have the following real estate speculation scenario for a 1 year investment: Purchase price of house: $170,000 Equity: $120,000 Debt: $50,000 @10% interest Interest Payments: $5,000   What is the leverage ratio in this scenario? Suppose that real estate prices are increasing. All else being equal, what would happen if the leverage ratio increased?