Q.1 Investment opportunity A will require a principal of $1,000 and will yield $200 over the course of 4 years. Investment opportunity B will require a principal of $1,600 and will pay $400 over a five year period. Which of the following statements is true?

Group of answer choices

The average annual rates of return of the two investment opportunities are equal.

Investment A has a lower average annual rate of return than does Investment B.

Given this information, the average annual rates of return cannot be computed.

Investment A has a higher average annual rate of return than does Investment B. Ignore the time value of money.

Q.2 Refer to question 35. Suppose that Investment A was a piece of land that you purchased for $1,000 and sold for it $1,200 four years later. Assuming you are in the 35% tax bracket and long term capital gains are taxed at 20%, your net average annual rate of return on investment would be:

Group of answer choices

4%

4.25%

1.75%

3.25%