Pigou Buys a House for $500,000, Rents It for $2,000

question 53

Multiple Choice

Pigou buys a house for $500,000, rents it for $2,000 per month for four years, and then sells it for $600,000. What is Pigou's per-year rate of return?

• A) 4.8 percent
• B) 9.8 percent
• C) 20 percent
• D) 39.2 percent

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Definitions:

Price Level

A measure of the average prices of goods and services in an economy at a given time.

Federal Deregulation

The process of removing government restrictions and rules in industries to increase efficiency and competition.

Interest Rates

The amount charged by lenders to borrowers for the use of money, expressed as a percentage of the principal, typically over a one-year period.

Existing Loans

Financial obligations that are currently outstanding and have not yet been repaid.