A magazine subscription costs $45 per year at the beginning of each year, or $115 now for a three-year subscription. If the subscriber elects to pay the $115 now, the rate of return on the investment will be nearest to:

The answer is 18%

Explanation:

Return on investment is defines as the revenue or profit that is earned by a business as a result of certain amount invested in a business or activity.

It is calculated by dividing profit realised by the amount invested.

The magazine subscription costs $45 a year, so for 3 years a subscriber pays 45*3 = $135

However the amount he actually paid is $115 for the 3 years.

Gain in this transaction = 135 - 115 = $20

Return on investment = gain/amount invested

Return on investment = 20/115

Return on investment = 0.17391

Return on investment = 17.391%

This is closes to 18%

B. 18%

Explanation:

Assuming another different subscriber decides to go for the $45 per year subscription cost then I'm three years would have paid ($45*3=$135).

The rate of return on the investment for the subscriber that elects to pay the $115 now will be;

$135-$115=$20,

we find the percentage of the difference from $115.

=20/115 x 100 = 17.4% nearest to 18%.