Question

The rate of return on an investment, also called the yield, is the

relationship between the yearly (annual) inflow from the investment
and the cost of the investment. For example, a $100 savings account
that earns 3 would have a 3 percent yield ( 3+ $100). Calculate the
yield for the following investments.
a. $8 dividend on a stock that cost $160
b. $1,000 rent on land that cost $10,000
c. $74 interest on a bond that cost $960
d. $5,600 profit from a business that had a startup cost of $78.000

Answer 1

The yield or rate of return on an investment is calculated by dividing by the cost of the investment, and then multiplying the result by 100 to express it as a percentage.

a. To calculate the yield for the investment with an $8 dividend on a stock that cost $160, we divide the yearly inflow ($8) by the cost of the investment ($160). The result is 0.05. Multiplying this by 100 gives us a yield of 5 percent.

b. For the investment with a $1,000 rent on land that cost $10,000, we divide the yearly inflow ($1,000) by the cost of the investment ($10,000). This gives us 0.1. Multiplying by 100, we get a yield of 10 percent.

c. To calculate the yield for the investment with a $74 interest on a bond that cost $960, we divide the yearly inflow ($74) by the cost of the investment ($960). This gives us approximately 0.077. Multiplying by 100, we get a yield of approximately 7.7 percent.

d. Finally, for the investment with a $5,600 profit from a business that had a startup cost of $78,000, we divide the yearly inflow ($5,600) by the cost of the investment ($78,000). This gives us approximately 0.0718. Multiplying by 100, we get a yield of approximately 7.18 percent.

Therefore, the yields for the investments are as follows:

a. 5 percent

b. 10 percent

c. 7.7 percent

d. 7.18 percent.

Remember, the yield represents the percentage return on the investment relative to its cost.

Explanation: