Problema Solution
Sarah is thinking about purchasing an investment from Hibond Investing, If she buys the investment, Sarah will receive $100 every three months for five years. The first $100. payment will be made as soon as she purchases the investment. If Sarah's required rate of return is 16 percent , to the nearest dollar, how much should she be willing to pay for this investment?
Answer provided by our tutors
since she gets $100 every three months for five years,also since she gets $100 initially, the total amount she will get in five years is $2100
i.e (4X5X$100)+$100=$2100.
hence if she want to get 16 % as rate of return she must have invested $Y.
therefore
Y+0.16Y=$2100
hence the answer is Y=$1810