Question

You invest $1000 per month for 9 months starting 4 months from now (i.e., from month 4 to month 12), and then you increase your investment by $100 per month for 2 years (i.e., from month 13 to month 36). If the rate of return is 60% per year, what is the equivalent annual worth ($ per year) of this cash flow in years 1 to 3?

USE THE GIVEN FORMULAS WHENEVER POSSIBLE, NO Matlab or Excel solution

Answer 1

Here you are investing 100 every month starting from 4th month to 12th month then you increase your monthly investment by 100 per month starting from year 13 to 36 months

Interest rate = 60 % per year

Interest rate = 5% per month

PW = 100(P/A,5%, 33) (P/F,5%,3)+100(P/7,5%, 25) (P/F,5%, 11)

PW = 1, 382.36 + 7848.004247

PW = $ 9, 230.36

Now conerting it to equivalent annual worth

AW = PW(A/P,60%,3) = $ 9, 230,36 x 0.793798

AW = PW(A/P,60%, 3) = $ 7, 327.05

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