Question

Supriya invested $14,320 in a highly rated ETF. At the end of four years, she had $18,434. What was her annual effective yield on this investment? Enter your answer as a percent rounded to four decimal places.

Answer 1

Answer:

6.517%

Step-by-step explanation:

This is a multi-year investment and we are not working with a $1 initial investment. There is no mention of compounding so we will use formula A=P0⋅(1+r)N with A=$18,434 and P0=$14,320. We do not know the value of r. However, N=4 years. Substituting the values we have $18,434=$14,320⋅(1+r)4. Divide both sides of the equation by $14,320. Next, take the fourth root of both sides of the equation and subtract 1 to find the decimal form of r.

$18,4341.287291.065170.06517=$14,320⋅(1+r)4=(1+r)4=1+r=r

Finally, convert r to a percent.

r=0.06517×100%=6.517%