55. An investor buys a commercial property for $260,000. Six months later, he sells the property through a broker for $310,000 and pays the broker a 4% commission. What is the investor's approximate net rate of return on the investment?
Answer: C
The investor's approximate net rate of return on the investment is 19%
The investor's net profit after selling the commercial property and paying the broker's commission results in a net rate of return of approximately 19%. This calculation considers the initial investment, the selling price, and the costs incurred from the commission.
A) 9%
Option A is incorrect because a net rate of return of 9% does not accurately reflect the investor's profitability after accounting for the sale and commission. The calculations show a higher return based on the profits made from the investment.
B) 12%
Option B is also incorrect as it underestimates the investor's net return. The calculations reveal that the profit margin exceeds the 12% threshold, given the significant increase in the property's selling price.
C) 19%
Option C is correct. After selling the property for $310,000 and deducting the broker's 4% commission, the investor's net profit is calculated, leading to a net rate of return of approximately 19%. This reflects the gain relative to the original investment of $260,000.
D) 24%
Option D is incorrect because the investor's calculated return does not reach 24%. The commission deducted from the selling price reduces the final profit, confirming that the rate of return is lower than this figure.
Conclusion
The correct answer of 19% accurately represents the investor's net rate of return after accounting for all relevant costs. The other options fail to reflect the true profitability of the investment when the commission is factored in, demonstrating the importance of precise calculations in determining returns on investment.