Question

An investor purchased two lots and paid $18,000 for each one. Since each lot had a 60' frontage he was able to subdivide the combined parcels in three lots with equal front footage. If the three lots sold for $15,000 each, his rate of profit on his investment was:______

Answer 1

The rate of profit on the investment is 25%.

Step-by-step explanation:

To find the rate of profit on the investment, we first need to calculate the total cost of the two lots. Since each lot was purchased for $18,000, the total cost is 2 x $18,000 = $36,000.

Next, we need to determine the total revenue from selling the three lots. Since each lot sold for $15,000, the total revenue is 3 x $15,000 = $45,000.

Finally, we can calculate the rate of profit using the formula: Rate of Profit = (Total Revenue - Total Cost) / Total Cost

Substituting the values we found, the rate of profit is: Rate of Profit = ($45,000 - $36,000) / $36,000 = $9,000 / $36,000 = 0.25, or 25%.