If you earn $40 a year on a $500 investment, what is the annual rate of return?

Question

If you earn $40 a year on a $500 investment, what is the annual rate of return?

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Thu Thảo 1 year 2021-09-05T15:59:09+00:00 2 Answers 10 views 0

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    0
    2021-09-05T16:00:19+00:00

    Answer:

    Annual rate of return is 8%

    Step-by-step explanation:

    0
    2021-09-05T16:01:06+00:00

    Answer:

    40/500 = 8%

    Step-by-step explanation:

    40/500 = 8%

    So the answer is 8%/year.  The question is if the $40 is reinvested, then will the following year’s return be 8% of $540 is $43.20?  If it were, this would be an example of compound returns is getting interest (or a return) on the previously earned interest. That’s an 8% per annum simple yield.   You’d be better off finding something that compounded your investment.

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