Question
Hi, I'm trying to answer this IRR question and how I would express it. Your client wishes to insure their Ferrari.Mooncorp Insurance has quoted an
Hi, I'm trying to answer this IRR question and how I would express it.
"Your client wishes to insure their Ferrari.Mooncorp Insurance has quoted an annual premium to insure the car of $15,000. Mooncorp offers a 5% discount if you pay the lump sum immediately. They also offer an alternative payment method.
The account can be paid in full by making 12 equal start-of-the month payments of $1,400, rather than the lump sum, with the first payment due upfront.What is the effective annual opportunity cost of paying monthly? In other words, what interest rate is being charged if your client decides to use the repayment plan as opposed to the lump sum?"
I must provide one complete manual trial calculation of the IRR to demonstrate that you understand the process.
Thanks in advance
Alex
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started