Final answer:
To calculate the return on an investment that involves a stream of payments, use the present value of an annuity formula. In this case, the return is approximately 3.68%.
Step-by-step explanation:
To calculate the return on an investment, we need to use the formula for the present value of an annuity. The formula is:
PV = C × [(1 - (1 + r)^(-n)) / r]
Where PV is the present value, C is the cash flow per period, r is the interest rate per period, and n is the number of periods.
In this case, the PV is $22,950, C is $6,000, and n is 10 years. We need to solve for r, the interest rate per period.
By rearranging the formula, we can isolate r:
r = (1 - (PV / (C × n)))^(1 / n) - 1
Now we can substitute the values and calculate the interest rate:
r = (1 - (22,950 / (6,000 × 10)))^(1 / 10) - 1
r ≈ 0.0368
So, the return on the investment is approximately 3.68%.