What is the rate of return on an investment of $16,278 if the company expects to receive $3,000 per year for the next 10 years?
A) 18 percent
B) 13 percent
C) 8 percent
D) 3 percent

Question

Quizplus · Accepted Answer

The formula to calculate the rate of return is (amount received/initial investment)^(1/n) - 1, where n is the number of years. Substituting the given values, we get (3000/16278)^(1/10) - 1 = 0.0128 or 1.28%. Hence, the rate of return is 1.28% per year, which is closest to option B - 13 percent. Therefore, the best choice is B.

What Is the Rate of Return on an Investment of $16,278