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?

Answer 1

14.18%

Explanation:

The annual effective yield is basically the overall return on investment that was made by taking into account compounding and combining it all into a single simple annual return. We can calculate this value by simply dividing the balance at the end of the year by the initial investment like so...

$1,621.40 / $1,420 = 1.1418

Now we subtract by 1 and multiply by 100 to get the percentage value.

(1.1418 - 1) * 100 = 14.18%