A man pays 30 times the annual rent to purchase a building. The rate % per annum he derives from his investment is:
A. 2%
B. 3%
C. 4%
D. 5/3 %
E. 10/3%
Hi fcabanski,
As I understand annual rate of return is the rate returned on investment after a period of 1 year.
x = rent amount
Original investment = 30x
After 1st year = 31x (30x + 1 year's rent)
Increase = 1x
Annual rate of return = $\displaystyle \frac{1}{30}=.0\overline{3} = \frac{10}{3}$%.