Question

A neighbor offers to pay you $600 to borrow your $500 for one year
ROI=

Answer 1

The ROI for lending $500 and being paid back $600 after one year is 20%.

Step-by-step explanation:

If a neighbor offers to pay you $600 to borrow your $500 for one year, the Return on Investment (ROI) can be calculated using the following formula:

ROI = (Net Profit / Investment Costs) × 100%

Firstly, we need to determine the Net Profit, which is the difference between the amount you will get back ($600) and the amount you lent ($500):

• Net Profit = $600 - $500 = $100

Now, we calculate the ROI:

• ROI = ($100 / $500) × 100%
• ROI = 0.2 × 100%
• ROI = 20%

So, the ROI for this transaction is 20%.