72. LEVERAGED RETURN
The return on assets using borrowed money, called leveraged return, is given by
L=[Y - (1 - D)R] /D
where Y is the return of the asset, R is the cost of borrowed money, and D is the percentage of money the investor must put down to secure the loan. Suppose that both Y and R are constant.
a. Find lim L and interpret your result. D→0+
b. Find lim L and interpret your result. D→1 Source: Scientific American.