An investor is considering the purchase of a rental house for $120,000. The house generates monthly rent of $1.150 per month with no expected vacancy, and annual operating expenses are expected to be $4,800. The investor expects to hold the property for five years and then hopes to sell for $150,000.Based on these assumptions, what is the expected overall eturn on this investment? @ 10.22% 10.69% 11.48% @ 12.40%

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Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.