You Are Offered a Chance to Buy an Asset for $7,250

question 108

Multiple Choice

You are offered a chance to buy an asset for $7,250 that is expected to produce cash flows of $750 at the end of Year 1, $1,000 at the end of Year 2, $850 at the end of Year 3, and $6,250 at the end of Year 4.What rate of return would you earn if you bought this asset?

• A) 4.93%
• B) 5.19%
• C) 5.46%
• D) 5.75%
• E) 6.05%

---

Definitions:

Agent

An individual or organization empowered to represent another party (known as the principal) in transactions with third parties.

Principal

The original sum of money borrowed in a loan, or the amount of the investment before earnings or losses.

Law

A system of rules created and enforced through social or governmental institutions to regulate behavior and ensure justice and order in society.

Independent Contractors

Workers who provide services to a business under terms specified in a contract or agreement, without being considered employees of the business.