Question

Tammy can buy an asset this year for $1,000. She is expecting to sell it next year for $1,050. What is the asset’s anticipated percentage rate of return?

Answer 1

Answer:

The asset’s anticipated percentage rate of return is 5%

Explanation:

Rate of return is the annual return that an investor earns on an Initial investment in an asset.

RatReturn on Asset = Expected selling price - Initial Purchase price

Return on Asset = $1,050 - $1,000

Return on Asset = $50

Rate of return = Return on Asset / Initial Purchase price = $50 / $1,000 = 0.05 = 5%