Saint Mary's is offered a contract, which requires an immediate investment of $25 million. The estimated returns are $5 million per year for 20 years. Compute the rate of return.
A) 19.42%
B) 99.9%
C) 7.75%
D) 12.45%
E) 13.79%

Question

Quizplus · Accepted Answer

The rate of return is calculated as the annual return divided by the initial investment. In this case, the annual return is $5 million and the initial investment is $25 million, so the rate of return is 5/25 = 0.2 or 20%.

Saint Mary's Is Offered a Contract, Which Requires an Immediate