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An antique was bought for $3,000 and was sold 10 years later for $6,000. Find the effective yield.
i do't think it's asking for profit, i looked up effective yield and got this but i can't figure out how to put it in the problem.
Effective Yield = ((1 + i/n) to the power of n) - 1
i = Nominal or stated interest rate
n = Number of compounding periods per year
SOMEBODY PLEASE HELP!!!
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Effective Yield -- A complete definition
Effective yield, or effective rate, or true interest rate, is the equivalent simple interest rate per annum, without compounding.Originally Posted by xenophos
In other words, if a principal is invested in compound interest and it yields to an amount A at the end of a time y, then an equivalent simple interest without compounding that will yield to the same amount A after the same time y is the effective rate or effective yield or true interest rate of that same investment.
That explanation does not even apply to your question here because the antique is not invested with an interest rate of any kind. The antique just appreciates in value with time. Still that is an investment. The effective yield then is the appreciation rate per annum as if the antique's value is earning/appreciating in simple interest without compounding.
A = P(1+r)^n
where
A = amount after n years
P = principal or initial amount at zero year
r = intrest rate per annum, in decimals
n = time in years
So,
6000 = 3000(1+r)^10
(1+r)^10 = 6000/3000 = 2
(1+r) = 2^(1/10) = 1.071773
r = 1.071773 -1 = 0.071773 = 7.1773 percent per annum.
Therefore, the effective yield on the antique's value is 7.1773 percent per year.----answer.
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