Suppose Country A has a high average wage level and a high level of output per person, while Country B has a low average wage le
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Invested amount in a government bond = $50.
Total returned amount after 1 year =$54.
We need to find the amount of interest earned first.
Amount of intrest earned in a year = Total returned amount after 1 year - Invested amount in the government bond.
Therefore, Amount of intrest earned in a year = $54 - $50.
= $4.
Therefore, earned interest is $4 in an year.
Now, we need to find the intrest rate.
We know the formula,
Plugging values in above formula, we get
Rate of interest =
Dividing 100 by 50, we get 2.
Therefore, Rate of Interest (ROI) = 8% per year.