Rate of return question

[Matt Inman]

My wife and I were discussing loaning a friend some money at dinner and we had this come up. We loan them $10,000 at 4%, they pays us back within say 90 days. They does this 3 more times in a years time, for a total of four loans paying us back each time. What is our rate of return for the year? My wife says 16%, I say 4%. Her explanation was that we lent $10,000 4 times and got back $1,600. I say its 4%, we lent $40,000 and got back $1,600.