The rate of return for an asset that costs $200,000 and promises to pay $40,000 net per year forever to its owner is ________ percent.

Name: The rate of return for an asset that costs $200,000 and promises to pay $40,000 net per year forever to its owner is ________ percent.
Brand: Quizplus
Rating: 4.8 (48 reviews)

Question

Quizplus · Accepted Answer

To calculate the rate of return, we divide the annual net payment ($40,000) by the initial cost ($200,000).

$40,000/$200,000 = 0.20 = 20%

Therefore, the correct answer is (C) 20.

The Rate of Return for an Asset That Costs $200,000