Patricia borrowed $20,000 to make a $50,000 real estate investment.She later sold the real estate making a $4,000 profit.What was Patricia's total return on this investment?

Question

Quizplus · Accepted Answer

To find Patricia's total return on investment, we need to calculate the percentage increase in the value of her investment.

Her initial investment was $20,000, and she made a profit of $4,000. Therefore, her final return was $20,000 + $4,000 = $24,000.

To calculate the percentage increase, we divide the profit by the initial investment:

$4,000 ÷ $20,000 = 0.2

Multiplying this by 100 gives us 20%.

However, the question asks for Patricia's total return on the investment, which includes both her profit and her initial investment. So, we need to calculate the total return as a percentage of her initial investment:

$24,000 ÷ $20,000 = 1.2

Multiplying this by 100 gives us 120%.

But we need the percentage increase from the initial investment, so we subtract 100%:

120% - 100% = 20%

Therefore, Patricia's total return on the investment was 20%, which is answer choice B. However, this is a poorly worded question, and answer choice C, 13%, could also be considered correct if we interpret "total return" as referring only to the profit she made.

Patricia Borrowed $20,000 to Make a $50,000 Real Estate Investment