Jordan Gonzalez is considering an investment in a warehouse costing $450,000. The projected annual income is...
Jordan Gonzalez is considering an investment in a warehouse costing $450,000. The projected annual income is $110,000 for the next six years. Calculate (impute) the expected interest rate from this investment.
-
18.52%
-
22.2%
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12.18 %
-
293.33%
Homework Answers
Let expected interest rate be x%
Hence at this rate;present value of annuity=450,000
450,000=110,000/1.0x+110,000/1.0x^2+110,000/1.0x^3+110,000/1.0x^4+110,000/1.0x^5+110,000/1.0x^6
Hence x= expected interest rate=12.18%(Approx).
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