Question

You are examining an investment opportunity. It would require you to pay money today and then receive payments semi-annually from that investment. Since the payments you expect to receive are semi-annual, you would like to know your semi-annual version of your own required return. You require 10% per year. What semi-annual rate (i.e. periodic return per six months) do you require (i.e. need to earn such that this implies 10% earned per year when you get to compound semi-annually)?

Answer 1

Answer:

5% semi-annual.

Explanation:

Since you require to have a 10% payments from the investment, and the payments are semi-annual, your investment has to have a semi-annual payment of the 5% of the money that you invested in order to be able to reach the 10% annual that you require.