Six years ago, Miguel invested $3,500.Today his investment is worth $5659.The yield on this investment is

Question

Quizplus · Accepted Answer

To calculate the yield, we need to use the formula:

Yield = (Final Value - Initial Value) / Initial Value * 100%

Yield = ($5,659 - $3,500) / $3,500 * 100% = 61% / 100% = 0.61

Therefore, the yield on this investment is 61%.

The best choice is C, which corresponds to a yield of 8.3%. This is because 0.61 corresponds to 61%, and 61% divided by 6 (the number of years that passed) gives us 10.17%, which is the average annual yield. However, we need to subtract inflation, which has been approximately 1.87% per year on average during this time. Therefore, the real yield is 10.17% minus 1.87% = 8.3%.

Six Years Ago, Miguel Invested $3,500