Your end as a friend? 2. If you were to invest $2000 today and in return...

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Answer 1

Answer #1

2.

$450 $450 $450 $450 $450 $450 2 3 4 5 S2000

Let, annual rate of return = R

Time = 6 years

Then,

2000 = 450*(1-1/(1+R)^6)/R

At R = 9%

PW of cash inflows = $2018.66

At R = 10%

PW of cash inflows = $1959.87

As per the method of interpolation

R = 9% + ((2018.66- 2000)/(2018.66 - 1959.87))*(10% - 9%)

R = 9.32%

So, annual rate of return is 9.32%.

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Answer 2

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