Final answer:
To find the rate of return on an investment of $1,000 that pays $250 annually for 5 years, financial mathematics and an internal rate of return calculation would be necessary. However, details such as compounding frequency are needed for an exact calculation.
Step-by-step explanation:
The question is asking for the rate of return on an investment of $1,000 that pays $250 annually for five years. This investment scenario is typically analyzed using concepts from financial mathematics, particularly time value of money and internal rate of return calculations. In this scenario, one must find the discount rate that would make the net present value of the annuity payments ($250 each year for five years) equal to the initial investment ($1,000).
It is important to note that without more information, such as compounding frequency and the existence of other external factors, determining the exact rate of return requires iterative methods or financial calculators.
The given example of an alternative investment mentions a 12% rate of return in one year for a different investment, which affects the decision on how much to pay for the bond, but it isn't directly used to calculate the rate of return for the original question.