Solving for Rates What Annual Rate of Return Is Earned

question 83

Multiple Choice

Solving for Rates 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:

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs, indicating the surplus generated beyond the normal profit expected in a competitive market.

Total Costs

The complete sum of expenses incurred in the production of goods or services, including both fixed and variable costs.

Perfectly Competitive

A market structure where there are many buyers and sellers, products are identical, and there is free entry and exit in the market.

Production Technology

The quantitative relationship between inputs and outputs.