Question
You are considering a safe investment opportunity that requires a $1,330 investmenttoday, and will pay $990 two years from now and another $970 five years
You are considering a safe investment opportunity that requires a $1,330 investmenttoday, and will pay $990 two years from now and another $970 five years from now.
a. What is the IRR of thisinvestment?
b. If you are choosing between this investment and putting your money in a safe bank account that pays an EAR of 5% per year for any horizon, can you make the decision by simply comparing this EAR with the IRR of theinvestment? Explain.
a. What is the IRR of thisinvestment?
The IRR of this investment is _________(Round to two decimalplaces.)
b. If you are choosing between this investment and putting your money in a safe bank account that pays an EAR of 5% per year for any horizon, can you make the decision by simply comparing this EAR with the IRR of theinvestment? Explain.
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
Entrepreneurial Finance
Authors: J. Chris Leach, Ronald W. Melicher
2nd Edition
0324289235, 9780324289237
