London purchased a piece of real estate last year for 84600

London purchased a piece of real estate last year for $84,600. the real estate is now worth $100,300. if London needs to have a total return of 0.20 during the year, then what is the dollar amount of income that she needed to have to reach her onjective?

Solution

The dollar amount of income that she needed to have to reach her objective = $1,220

Total Return = (Worth of real estate now – purchase price) + Desired Ne Income / Purchase Price

0.20 = ($100,300 - 84,600) + Desired Net Income / 84,600

0.20 x $84,600 = $15,700 + Desired Net Income

$16,920 = $15,700 + Desired Net Income

Desired Net Income = $16,920 – 15,700

Desired Net Income = $1,220