PLEASE HELP ASAP!!!!!Sunny earns $22.75 per week delivering newspapers. He worked as a delivery boy for 3 weeks. He also earned
$32.75 last
month doing chores around the house. He spent $14.25 of his total earnings to download music on his mobile device. Sunny put
of the remaining money in his savings account. Sunny used the following steps to find the total money he put in his savings
5
account:
Step 1: [($22.75 + 3) + $32.75 - $14.25)
5
Step 2: [$44.25)
Step 3: $11.0625
In which step did Sunny first make an error? Use words to explain how Sunny can correct his error.
month doing chores around the house. He spent $14.25 of his total earnings to download music on his mobile device. Sunny put
of the remaining money in his savings account. Sunny used the following steps to find the total money he put in his savings
5
account:
Step 1: [($22.75 + 3) + $32.75 - $14.25)
5
Step 2: [$44.25)
Step 3: $11.0625
In which step did Sunny first make an error? Use words to explain how Sunny can correct his error.
1 answer:
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Answer:
- <u>The rate of return is 8.15%</u>
- <u>This is a good investment</u>
<u></u>
Explanation:
For the first question, you need to find the rate that makes the present value of a stream of ten constant annual payments of $15,000 equal to the $100,000 investment.
The formula that returns the present value of a constant payment is called the annuity formula and is:
In your problem you know:
- Present value: $100,000
- payment: $15,000
- r: ?
- t: 10
You cannot solve for r directly. You must guess a value and calculate the right side of the equation until to you find the rate that makes it equal to 100,000.
Try 5%:
Then, the rate of return is greater than 5%. After several trials you will find that the rate of return is 8.15%.
Since this rate is higher than 8%, which is what the company requires, this is a good investment.