Question

John buys an investment for $100,000 at the beginning of the year. During the year, John receives $10,000 from his investment. At the end of the year, John sells his investment for $120,000. What is John’s rate of return during the year?

Answer 1

Answer:

10%

Explanation:

The computation of the rate of return during the year is shown below:

Rate of return = (End year investment price - beginning year investment price + additional investment received) ÷ (beginning year investment price)

= ($120,000 - $100,000 + $10,000) ÷ $100,000

= $10,000 ÷ $100,000

= 10%

Simply we applied the above formula so that the rate of return could come