An Investment Today of $25,000 Promises to Return $10,000 Annually

question 88

Multiple Choice

An investment today of $25,000 promises to return $10,000 annually for the next 3 years.What is the approximate real rate of return on this investment if inflation averages 6% annually during the period?

• A) 3.5%
• B) 9.7%
• C) 14.0%
• D) 20.0%

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Definitions:

Fixed Costs

Expenses that do not vary with the level of production or sales, such as rent, salaries, and loan payments.

Marginal Productivity

Marginal productivity measures the change in output resulting from altering the level of a single input while holding other inputs constant.

Marginal Costs

The added financial burden of creating one more unit of a product or service.

Average Costs

The total cost of production divided by the quantity produced, often used to evaluate production efficiency.