If a $10,000 investment earns interest of $500 in one year, what is its rate of return?

Simple interest is the interest paid on the principal at a given rate of interest.

Answer: If a $10,000 investment earns an interest of $500 in one year, the rate of return is 5%.

Let us apply the simple interest formula to solve the problem.

Explanation:

The formula for calculating the simple interest is:

Simple Interest = (P × R × T)/100

Where, 'P' is the principal amount, 'r' is the rate of interest and 't' is the time

Substituting the values of principal (P) = 10000, time (t) = 1 year, Interest = 500, Rate = ?

500 = (10000 × r × 1)/100

500 × 100 = 10000 × r

r = 5

Therefore, the rate of interest = 5%

Thus, the rate of return for the given investment is 5%.