An investor bought a one-acre lot on the outskirts of a city for $12,700cash. Each year...
An investor bought a one-acre lot on the outskirts of a city for $12,700cash. Each year she paid $175 of property taxes . At the end of 7 years, she lost the plot for a net value of $25,000. What rate of return did she receive on her investment?
Homework Answers
FV = PV(1+r)^n
r = Rate of ret
n = holding period
FV = PV(1+r)^n
$ 25,000 = $ 12,875 (1+r)^7
(1+r)^7 = 25000 / 12875
= 1.9418
1+r = (1.9418)^(1/7)
= 1.0994
r = 1.0994 - 1
= 0.0994 i.e 9.94%
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