Yield rate tells you what percent was made from an investment. A business can use yield rate to compare a variety of projects or investments to see which is the most profitable. To calculate yield rate, you will need all variables involved, including the initial investment and the amount of money made from the investment. Yield rate is calculated for a certain period of time, such as one or five years. The higher the yield rate, the more profitable the investment.
Determine the amount of your initial investment. You will also need to know how what the end of the investment period is. For our example, $10,000 is invested for one year. Determine how much money was made from the investment at the end of the year.
Divide the amount of money earned from the investment by the initial investment. If $400 was earned from the investment at the end of the year, divide $400 by $10,000. The yield rate would be 4 percent (.04). If the amount earned from the investment was $750, the yield rate would be 7.5 percent.
Compare yield rates of two investments. If you invest $3,000 for one year and receive a return of $200 your yield rate is 6.6 percent (.066). An investment of $15,000 for one year returns profits in the amount of $950; therefore the yield is 6.3 percent (.063). Many companies will consider the $3,000 investment to be the better investment because it has the highest yield rate.