Question

Question Joan invested $1,420 at the start of the year and found she had $1,621.40 at the end of the year. What is the annual effective yield of her investment? Input your answer as a percentage rounded to two decimal.

Answer 1

Money invested = $1420

Final money = $1621.4

Effective yield = [ 1 + i/n]^n - 1

i = nominal rate let's consider 10%

n = number of payments 12 payments because it is in a year

Effective yield = [1 + 0.1/12]^12 - 1

= [ 1 + 0.00833]^12 - 1

= [1.0083]^12 - 1

= 1.1 - 1

Effective yield = 0.10 %