Answer: We should accept this investment decision as the required rate of return is 15% annually and by accepting this investment 15% interest is being received annually. By giving $35000 today we will receive six installment of $7456.57 which include interest component.
Detailed solution is being provided below:
A | B | C | D | E | F | ||
5 | Q2(a) | Finding Semi annual repayment by taking 15% rate of return | |||||
6 | m | #Yrs | Arate | PV | PMT | FV | |
7 | 2 | 3 | 15% | $ 35,000.00 | $7,456.57 | $ - | |
EXACT EXCEL FUNCTION |
|
A | B | C | D | E | F | ||
9 | Q2(b) | Finding present value | |||||
10 | m | #Yrs | Arate | PV | PMT | FV | |
11 | 2 | 3 | 15% | ($35,000.0) | $ 7,456.57 | $ - | |
EXACT EXCEL FUNCTION |
|
A | B | C | D | E | F | ||
13 | Q2(c) | Finding Interest Rate | |||||
14 | m | #Yrs | Arate | PV | PMT | FV | |
15 | 2 | 3 | 15.00% | $ 35,000.00 | $ 7,456.57 | $ - | |
EXACT EXCEL FUNCTION |
|
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