What Annual Rate of Return Is Implied on a $700

question 68

Multiple Choice

What annual rate of return is implied on a $700 loan taken next year when $800 must be repaid in year 3?

• A) 4.55 percent
• B) 4.76 percent
• C) 6.90 percent
• D) 7.14 percent

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Definitions:

Profit

The financial gain obtained when the revenue generated from business activities exceeds the expenses, costs, and taxes involved in sustaining the activity.

Objective Function

A mathematical function used in decision-making, optimization, or problem-solving that specifies the objective to be maximized or minimized.

Maximize Contribution

A financial strategy or goal to increase the difference between total sales and total variable costs to maximize the profit contributed towards fixed costs and earnings.

Unbounded Maximizing

A type of optimization problem where the goal is to find the highest possible value of an objective function without upper limits.