Let C = the cost of capital investment today and R₁ = the return in one year. The rate of return on the investment equals A) (R₁ /C) - 1 B) R₁ C) R₁ /(1 + π)

Question

Quizplus · Accepted Answer

The rate of return on an investment is calculated by dividing the net profit (return minus cost) by the cost of the investment, and then subtracting 1. This is represented by the formula (R₁/C) - 1, where R₁ is the return in one year and C is the cost of the capital investment today.

Let C = the Cost of Capital Investment Today and R₁