Tran purchased a house for a rental property for $100,000 five years ago.During the time he owned this rental,his net rental income was a total of $4,000.He just sold the property for $120,000.What was his average annual return on this investment?
A)4.0%
B)4.8%
C)20%
D)24%

Question

Quizplus · Accepted Answer

Tran's total profit from the investment is the sum of the net rental income and the profit from the sale of the property. This equals $4,000 (net rental income) + ($120,000 - $100,000) (profit from sale) = $24,000. To find the average annual return, divide the total profit by the initial investment and then by the number of years: ($24,000 / $100,000) / 5 = 0.048 or 4.8%.

Tran Purchased a House for a Rental Property for $100,000