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Suppose Shaan invested just $10,000 of his own money and had a $90,000 mortgage with an interest rate of 8.5 percent. After three years, he sold the property for $120,000.
(a) What is his gross profit?
(b) What is his net profit or loss? (Input the amount as a positive value.)
(c) What is the rate of return on investment? (Negative amount should be indicated by a minus sign. Enter your answer as a percent rounded to 2 decimal places.)

Respuesta :

Answer:

a. $20,000

b. -$2,950

c. -29.50%

Explanation:

The computation is shown below:

a. Gross Profit is

= Sale value of Property - Invested amount - Mortgage amount

= $120,000 - $10,000 - $90,000

= $20,000

b. Net Profit

= Gross profit - number of years × mortgage amount × rate of interest

= $20,000 - 3 × $90,000 × 8.5%

= -$2,950

And,

c) Rate of return  is

= Net profit ÷ invested amount

= -$2,950 ÷ $10,000

= -29.50%