Answer:
IRR 6% for Jabob
His friend will need 12 years saving cash to obtain their collegue funds.
Explanation:
We will solve for the rate being the annuity of 3 payment of 800
and the present value 2,138.41
C 800
time 3
PV 2,138.41
rate ?
To solve we can use excel, a financial calculator or trial and error
For excel we will do the following:
write the list of cash through the loan life:
-2,138.41
+800
+800
+800
then we write in the empy cell
=IRR(
select the values and press enter
This will give the IRR which is 6%
For the second assignment:
we need to solve for time:
C 3,800
time n
rate 0.06
PV $31,897
We work out the formula:
Now we solve the right side and apply logarithmic properties
-n = -11.77128325
n = 11.77
It will take 12 years to obtain their target amount