3.5 If an investment of $115,000 resulted in income of $23,000 per year for 10 years, then...
3.5 If an investment of $115,000 resulted in income of $23,000 per year for 10 years, then what was the Rate of Return (ROR), i%, on the investment? (b) Re-calculate the Rate of Return (ROR), i%, using the Excel RATE function and record your cell entry and end result.
Homework Answers
ANSWER:
via excel:
In excel when we use the rate function we get i = 15.1%
| RATE |
| 15.10% |
via factor method:
initial investment = $115,000
yearly income = $23,000
n = 10 years
pw = yearly income(p/a,i,n)
115,000 = 23,000(p/a,i,10)
115,000 / 23,000 = (p/a,i,10)
5 = (p/a,i,10)
solving for i via trial and error we get that i is between 15% and 16% via interpolation and subsequently solving further we get that i is 15.1%
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