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February 24th, 2019, 01:08 AM   #1
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Total yield

Hello,


I'm unsure about a simple total yield math problem. Here it is:

If a project is USD100 and in year 1 you make USD10 rent and in year 2 you make USD12 and in year 3 you make USD12 and in year 3 you sold the project for USD128 at the end of year 3 with a rental yield of 7%. What is the total yield of this project?


Ok so total yield is just the income return on the investment, so it should be calculated as:

((10+12+12)/100)*100=(34/100)*100 = (total rental income/initial investment)*100

Which is 34%, right?
I'm just wondering whether I should use the 7% somewhere or is it just a useless information.


Thanks for the help
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February 26th, 2019, 07:37 AM   #2
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I don't know what selling something "with a rental yield of 7%" means. Selling something does not involve renting it! Was the word "rental" actually in the problem or was it just "with a yield of 7%"?

Assuming this was purchased for USD 100 and then sold for "a yield of 7%" then it was sold for a yield of 0.07(100)= USD 7. Adding to that the rentals of 10+ 12+ 12= USD32 the total yield is USD 39. "Yield" is not a percentage so there is no reason to divide by 100.

Last edited by skipjack; February 28th, 2019 at 06:01 AM.
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February 28th, 2019, 12:07 AM   #3
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Hi and thanks for the reply!

The word "rental" was in the problem, and I think that is what confused me.
Anyway, thanks for the answer, it makes sense
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February 28th, 2019, 09:25 AM   #4
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Code:
year   gain   balance
  0                100
  1      10      110
  2      12      122
  3      12      134
  3        7      141
41%. Silly problem!!
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