Dennis spends $400 on a snowblower,expecting to earn $80 per year for each of the next five years clearing out his neighbors' driveways.The rate of return he expects on this investment is
A)500 percent per year
B)100 percent per year
C)80 percent per year
D)25 percent per year
E)20 percent per year

Question

Quizplus · Accepted Answer

Dennis has spent $400 on a snowblower and expects to earn $80 per year for the next five years, so his total earnings will be: 
$80/year x 5 years = $400

Therefore, his total return on investment (ROI) is $400/$400 = 1 or 100%. Since this is spread out over five years, his annual rate of return is 100%/5 = 20%.

Therefore, the correct answer is E) 20 percent per year.

Dennis Spends $400 on a Snowblower,expecting to Earn $80 Per