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You own two investments, A and B, that have a combined total value of 51,422 dollars. Investment A is expected to make i...

You own two investments, A and B, that have a combined total value of 51,422 dollars. Investment A is expected to make its next payment in 1 month. A’s next payment is expected to be 364 dollars and subsequent payments are expected to grow by 0.35 percent per month forever. The expected return for investment A is 1.19 percent per month. Investment B is expected to pay 237 dollars each quarter forever and the next payment is expected in 3 months. What is the quarterly expected return for investment B? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.

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Answer #1

Value of the investment= Present value of A + PV of B

51422 = 364/(1.19%-0.35%)+ 237/Rate

51422 = 43333.33 + 237/Rate

237/rate = 8088.667

Rate = 0.0293

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