Tim purchased a bounce house one year ago for $6,500. During the year it generated $4,000 in cash flow. If Time sells the bounce house today, he could receive $6,100 for it. What would be his rate of return under these conditions?

55.39%

Explanation:

From the question, we are informed that Tim purchased a bounce house one year ago for $6,500 and that during the year it generated $4,000 in cash flow and if he sells the bounce house today, he could receive $6,100 for it.

His rate of return will be:

= [($6100 + $4000) - $6500]/$6500 × 100

= ($10100 - $6500)/$6500 × 100

= $3600/$6500 × 100

= 0.5539 × 100

= 55.39%

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