Question: A student organization, at the beginning of the fall quarter, bought and operated a soft-drink vending machine as a means of helping finance its activities. The vending machine cost $75 and was installed at a gasoline station near the university. The student organization pays $75 every 3 months to the station owner for the right to keep the vending machine at the station. During the year the student organization owned the machine, they received the following quarterly income from it, before making the $75 quarterly payment to the station owner:
Quarter Income
Fall $150
Winter 25
Spring 125
Summer 150
At the end of one year, the student group resold the machine for $50. Determine the quarterly cash flow. Then determine a quarterly rate of return, a nominal annual rate, and an effective annual rate.