Question

A pension fund is making an investment of $100,000 today and expects to receive $1,600 at the end of each month for the next five years. at the end of the fifth year, the capital investment of $100,000 will be returned. what is the internal rate of return compounded annually on this investment?

Answer 1

Answer:

The answer is 14.4%

Explanation:

Calculations as follows:

Total returns 1600*12*5=96,000

Plus the capital investment of 100,000

Total amount 100,000+96,000=196,000

196,000=100,000(1+r/100)∧5

196,000/100,000=(1+r/100)∧5

5√1.96=1+ r/100

5√1.96 -1= r/100

1.1440-1 = r/100

0.144=  r/100

r = 14.4%