The Expected Average Rate of Return for a Proposed Investment

question 54

Multiple Choice

The expected average rate of return for a proposed investment of $500,000 in a fixed asset, with a useful life of four years, straight-line depreciation, no residual value, and an expected total net income of $240,000 for the 4 years, is:

• A) 18%
• B) 48%
• C) 24%
• D) 12%

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Definitions:

Investors

Individuals or institutions that allocate capital with the expectation of receiving financial returns.

AUM

Assets Under Management, the total market value of investments managed by a person or entity on behalf of clients.

Redemption Notices

Notifications sent to holders of a financial instrument about the early redemption or buyback of the instrument before its maturity date.

Lock-Up

A period following an initial public offering (IPO) where major shareholders are restricted from selling their shares, often lasting from 90 to 180 days to prevent market flooding.