Question

A Ponzi scheme involves using new investment dollars to trick current investors into thinking they are earning high returns. If someone running a Ponzi scheme is bringing in new investors at a rate of 25% per year and stealing 10% of investments, what return could he pay investors? (Assume the money is never really invested.)
a) 15%
b) 20%
c) 25%

Answer 1

Answer: a) 15%

Explanation:

If an investor is bring in someone new at 25% and is stealing 10% of the investment, the return he could pay investors is (25-10%) which is 15%.