Multiple Choice
The required return of preferred stock is equal to the ________ ________ on the preferred stock.
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7. Receivables and Investments
Introduction to Investments in Securities
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Allie has \$1,000 invested in an account with an APY of 5%. How much interest will she earn in one year?
A
\$5
B
\$100
C
\$500
D
\$50
Verified step by step guidance1
Step 1: Understand the problem. Allie has \$1,000 invested in an account with an Annual Percentage Yield (APY) of 5%. The goal is to calculate the interest earned in one year using the formula for simple interest.
Step 2: Recall the formula for simple interest: \( I = P \times r \), where \( I \) is the interest, \( P \) is the principal amount, and \( r \) is the annual interest rate (expressed as a decimal).
Step 3: Convert the APY of 5% into a decimal by dividing by 100. This gives \( r = 0.05 \).
Step 4: Substitute the values into the formula: \( I = 1000 \times 0.05 \).
Step 5: Perform the multiplication to find the interest earned. The result will be the amount of interest Allie earns in one year.
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