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Question regarding the total return on an investment

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Reference no: EM131041274

Imagine that a friend tells you about a $200,000 house nearby your home that is practically guaranteed to go up in value, and you can buy it with only a $20,000 down payment. Suppose that your "revenue" from rent and tax advantages from depreciation is equivalent to your "expenses" from interest payments, property maintenance, and taxes on rental revenue. After only one year, the house goes up in value to $210,000 and you sell it yourself, avoiding any realtor expenses. What was the approximate annual rate of return on your initial investment? (Reminder: rate of return is the same as yield, that is, the total return on an investment expressed as a percentage of the invested amount.)

  • 10%
  • 20%
  • 50%
  • 100%
  • 200%

Reference no: EM131041274

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