Border Steel invested $500,000 in a new shearing unit. At an interest rate of 12% per...
Border Steel invested $500,000 in a new shearing unit. At an interest rate of 12% per year compounded quarterly, the annual income required to recover the investment in 3 years is closest to:
(a) $283,552
(b)$226,235
(c)$236,237
(d)$210,148
Homework Answers
Ans.-(D)
Future value of 500000 after 3 years at interest rate of 12% per year compounded quarterly = 500000(1+0.03)^12 = 712880.44. ( Quarterly interest = 12%/4 = 3% and there are 12 quarters in 3 years)
If 210148 is received at the end of each year it's future value is
210148(1+0.03)^8+210148(1.03)^4+210148 = 712880.62
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