What Annual Rate of Return Is Earned on a $5,000

question 42

Multiple Choice

What annual rate of return is earned on a $5,000 investment when it grows to $7,000 in six years?

• A) 1.40 percent
• B) 5.45 percent
• C) 5.77 percent
• D) 40.00 percent

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Definitions:

Profit Margin Ratio

A financial metric that measures the percentage of revenue that exceeds the cost of goods sold, indicating the efficiency with which a company produces goods.

Gross Margin Ratio

A financial metric that measures the difference between revenue and cost of goods sold, expressed as a percentage of revenue.

Return On Total Assets

Return On Total Assets (ROTA) is a financial metric used to assess a company's profitability by comparing net income to its total assets. It illustrates how efficiently a company uses its assets to generate profit.

Return On Common Stockholders' Equity

A measure of a corporation's profitability by disclosing how much profit a company generates with the money shareholders have invested.