An Investment Today of $25,000 Promises to Return $10,000 Annually

Multiple Choice

An investment today of $25,000 promises to return $10,000 annually for the next three years.What is the approximate real rate of return on this investment if inflation averages 6 percent annually during the period?

A) 3.5 percent
B) 9.7 percent
C) 14.0 percent
D) 20.0 percent Solving with financial calculator, the IRR = 9.701%.