After 20 years, 100 shares of stock originally purchased for $1000 was sold for $5,000. What was the yield on the investment? Choose the closest answer.
19%
5%
12.7%
8%
$4,000 profit divided by 20 years = $200 per year.
200 / 1000 = 0.2 = 20%
To calculate the yield on an investment, we need to consider the profit (or gain) made from the investment relative to the original cost of the investment. In this case, the original cost of the investment was $1000 and it was sold for $5000 after 20 years.
To find the profit, we subtract the original cost from the selling price: $5000 - $1000 = $4000.
Now, to calculate the yield, we use the following formula:
Yield = (Profit / Original Cost) x 100
Plugging in the values, we get:
Yield = ($4000 / $1000) x 100 = 400%
However, since none of the answer choices provided match this yield, we choose the closest available answer. The closest answer is 19%.