Answered: If you were to invest $2000 today and…

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If you were to invest $2000 today and in return receive $450 anually for 6 years, what is your annual rate of return?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

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If you were to invest $2000 today and in return receive $450 anually for 6 years, what is your annual rate of return?

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

Expert Solution

Step 1

N=6

PMT=450

PV=2000

I=?

2000=450/(1+I)+450/(1+I)^2........+450/(1+I)^6

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