Question

You are offered a chance to buy an asset for $4,500 that is expected to produce cash flows of $750 at the end of Year 1. $1,000 at the end of Year 2, $850 at the end of Year 3, and $4.450 at the end of Year 4. What rate of return would you earn if you bought this asset? Your answer should be between 5.08 and 22.48, rounded to 2 decimal places, with no special characters. 5 pts D Question 16 What's the present value of $11,500 discounted back 5 years if the appropriate interest rate is 5.0%, compounded semiannually? Your answer should be between 8032.00 and 9554.00, rounded to 2 decimal places, with no special characters.

Answer 1

From the question, I have noted down the cash flows as follows representing outflow as - and inflow as +

0	-4500
1	+750
2	+1000
3	+850
4	+4450

Assuming the rate of interest as r and calculating NPV for the cashflows

750 1000 850 4450 4500 = 1 V= 1+r+ (1+r)2 *(1 + r)3)*(1 + r)

Upon solving this, we would arrive at r = 15.0946% = 15.10%