Problem:
You own a vacant lot with a book value of $50,000. You find a speculator willing to pay you $200,000 for the lot. In case the speculator's plans do not materialize, the speculator wants to buy the right to sell you back the lot for $160,000 at the end of two years.
Required:
Question: What is the implied interest rate?
Note: Explain all calculation and formulas.