Mr. Darden is selling his house for $200,000. He bought it for $164,000 ten years ago. What is the annual return on his investment?

Question

BlackTom AI · Accepted Answer

The question asks for the annual return on investment given: purchase price $164,000 ten years ago, sale price $200,000 now.
First, determine the total gain: 200,000 − 164,000 = 36,000.
Next, calculate the return over the entire period and then annualize it using the original cost as the base: 36,000 gain over 10 years on a base of 164,000.
Annualized simple return = (36,000 / 164,000) / 10 years = 0.2195...% per year? Wait, recalculate carefully: (36,000 / 164,000) gives the total return over 10 years, which is 0.2195 (21.95%). To annualize, divide by 10 years: 21.95% / 10 = 2.195% per year.
Thus the annual return is about 2.2% per year.
Notes:
- This uses the standard ROI calculation: annual return = (Ending value − Beginning value) / Beginning value ÷ Number of years.
- If one were to interpret annual yield differently (for example, using compound annual growth rate), the result would be slightly different, but with the information given (simple purchase price vs sale price over a decade), the approximate annual return is about 2% per year.
- The provided answer choice states 'B. about 2%,' which aligns with the computed figure in this context.
- The question did not supply the options list here, so a direct comparison to other choices isn’t possible from the given data, but the calculation supports an answer in the vicinity of 2% per year.

25_2 FIN401 TVM Multiple choice questions

Mr. Darden is selling his house for $200,000. He bought it for $164,000 ten years ago. What is the annual return on his investment?

View Explanation

Log in for full answers

Similar Questions

A $1 investment made 10%, 20%, 30%, 10%, and 15% p.a returns in the first five years. What is the constant annual return for the five-year period that would have resulted in the same outcome at the end of Year 5 with compounded interest

Sara would like to evaluate the performance of her portfolio over the past 10 years. What compound annual rate of return has she achieved if she invested $12,000 10 years ago and now has $25,000?

An investor who was not as astute as he believed invested $281,000 into an account 6 years ago. Today, that account is worth $217,200. What was the annual rate of return on this account?

Sara would like to evaluate the performance of her portfolio over the past 10 years. What compound annual rate of return has she achieved if she invested $12,000 10 years ago and now has $25,000?

You discover an antique in your attic that you purchased at an estate sale 10 years ago for $400. You auction it on eBay and receive $8,000 for your item. What annual rate of return did you earn?

What two functions can be used to calculate the compound annual growth rate

In a consumer society, many adults channel creativity into buying things

More Practical Tools for Students Powered by AI Study Helper

Homework AI Solver

Stylized AI Paper Writer

Plagiarism Checker Assistant

Citation AI Academic Writing Tool

In-Class Translation Assistant

AI Note Generator

AI Quiz Answers

Past Exam Questions from University Test Bank

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler