Question

An investor bought a one-acre lot on the outskirts of a city for $12,700 cash. Each year she paid $175 of property taxes. At the end of 7 years, she sold the lot for a net value of $25,000. What rate of return did she recieve on her investment

Answer 1

79.5%.

Step-by-step explanation:

Rate of return =
`(final value - initial value)/(initial value)` x 100

The cost of the acre = $12700.

Total property taxes paid for 7 years = $175 x 7

= $1225

Net value of cost = $12700 + $1225

= $13925

Net value of the land when sold = $25000

∴ Rate of return =
`(25000 - 13925)/(13925)` x 100

= 0.7953 x 100

= 79.53%

The rate of return of the acre of land is 79.5%.