Question:
You would like to invest in one of the following assets. Use the present value of an annuity formula and the trial and error method to estimate the Internal Rate of Return or yield for each of the following two investments and decide which is the better investment.
A B
Initial Investment $8,500 $9,500
Income at Year End
Income: Year 1 $2,500 $2,000
Income: Year 2 $2,500 $2,500
Income: Year 3 $2,500 $3,000
Income: Year 4 $2,500 $3,500
Income: Year 5 $2,500 $4,000