On January 15, 2000, enterprise A loans $6, 120.00 to Enterprise B and $16, 900.00 to...
On January 15, 2000, enterprise A loans $6, 120.00 to Enterprise B and $16, 900.00 to Enterprise C. Enterprise B repays Enterprise A $7000 on January 15, 2002 and this money is reinvested at a 5% annual effective rate. Enterprise C repays Enterprise A $22500 on January 15, 2004.
What is the annual yield received by Enterprise B over the four-year interval?
Homework Answers
Figures in USD
Loan to Enterprise B = 6120
Repayment by Enterprise B = 7000
Duration = 2 years
Amount of 7000 reinvested for 2 years at 5 percent effective annual rate.
Value after 2 years = 7000 x 1.05 x 1.05 = 7717.50
Loan to Enterprise C = 16900
Repayment by Enterprise B = 22500
Duration = 4 years
Calculation of Total Yield = (Total Amount Received - Total Amount Invested or Given) x 100 / Total Amount Invested or Given
= [( 7717.50 + 22500 ) - ( 6120 + 16900 )] x 100 / ( 6120 + 16900 )
= [30217.5 - 23020] x 100 / 23020
= 7197.5 x 100 / 23020
= 31.2663 percent
Annual Yield = 31.2663 / 4
= 7.8166 or 7.82 percent
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