A purchaser pays $400,000 for a coal mine. The mine provides a cash return of $100,000 at the end of the year. From each year's cash return, the purchaser deposits a level amount into a fund that accumulates at an effective annual interest rate of 4%.

At the end of ten years, just after making the fund deposit, the purchaser sells the mine for a price of $10,000. The sale price plus the value of the fund exactly equals his original purchase price.

In which of the following ranges is the effective rate of return on his investment?

Possible Answers

A. < 14%

B. 14% but < 16%

C. 16% but < 18%

D. 18% but < 20%

E. 20%