Answer the following questions assuming the interest rate is 8 percent.
Time Value of Money Problems
Rate of Return Problems
i. An investment of $1,300 today returns $61,000 in 50 years. What is the internal rate of return on this investment?
j. An investment costs $750,000 today and promises a single payment of $11.2 million in 23 years. What is the promised rate of return, IPR, on this investment?
k. What return do you earn if you pay $22,470 for a stream of $5,000 payments lasting ten years? What does it mean if you pay less than $22,470 for the stream? More than $22,470?
l. An investment promises to double your money in five years. What is the promised IRR on the investment?