The value of an investment comes from its cash flows. Let's say you are intent on receiving $45,000 per year, starting at the

Question

4 years ago

14

The value of an investment comes from its cash flows. Let's say you are intent on receiving $45,000 per year, starting at the

end of year one and continuing over 10 years. A lump sum of $380,000 invested now (year 0) will allow you to receive your desired annual amount. What interest rate is required to make this happen?

Business

1 answer:

Licemer1 [7] · Answer 1 · 2022-01-15T07:27:34+03:00

Answer:

Interest rate of 11.84% is required to earn desired amount of $45,000 per year from an Investment of $380,000.

Explanation:

Amount of Investment = P = $380,000

Desired Return per month = A = $45,000

Number of Years = n = 10 years

Interest rate = ?

Use following formula to calculate Interest rate:

A = P x Interest rate

$45,000 = $380,000 x r

r = $45,000 / $380,000

r = 0.1184 = 11.84%

The value of an investment comes from its cash flows.​ Let's say you are intent on receiving​ $45,000 per​ year, starting at the

The value of an investment comes from its cash flows. Let's say you are intent on receiving $45,000 per year, starting at the