Question

Given the following: last year you bought an asset for $10, you sold it for $30 one year later, when you bought the asset you spent $40 to improve the asset. What is the rate of return on the asset over the year?

A. +66.66%

B. +200%

C. -200%

D. -40%

E. +40%

How do I solve this problem? Could you explain?

Answer 1

Ans:- Rate of return on the asset, in this case, will be calculated by

( Sale Price of the asset - Total Investment on the asset ) / Total Investment on the asset * 100

Total Investment on the asset includes the cost of buying the asset + money spend to improve the asset.

Total investment = $10 + $40 = $50

= ( $30 - $50) / $50 * 100 = -40%.

Therefore, the rate of return on the asset is -40%. Option D is the right answer.

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