Assume you purchased a rental property for $100,000 and sold it one year later for $115,000 (there was no mortgage on the property).At the time of the sale,you paid $3,000 in commissions and $1,000 in taxes.If you received $10,000 in rental income (all received at the end of the year),what annual rate of return did you earn?
A) 6%
B) 11%
C) 20%
D) 25%

Question

Quizplus · Accepted Answer

The initial investment was $100,000, and after one year, the property was sold for $115,000, resulting in a profit of $15,000. Subtracting the commissions and taxes paid ($3,000 + $1,000), the net profit is $11,000.

Adding the rental income of $10,000, the total return is $21,000.

To calculate the annual rate of return, divide the total return by the initial investment and multiply by 100 to get a percentage:

($21,000 / $100,000) * 100 = 21%

Therefore, the annual rate of return is 20%.

Assume You Purchased a Rental Property for $100,000 and Sold