An investment producing cash flows in the amount of $1,200 per month is undertaken for a period of 28 months. The investor pays $24,000 for the investment and the contract stipulates that investment returns must be reported on a basis equivalent with annual compounding. Given that theinvestment is sold after 28 months, what would be the equivalent annual compound rate of interest reported to the investor? What would be the annual rate compounded monthly for this investment?
An investment producing cash flows in the amount of $1,200 per month is undertaken for a period of 28 months. The investor pays $24,000 for the investment and the contract stipulates that investment returns must be reported on a basis equivalent with annual compounding. Given that theinvestment is sold after 28 months, what would be the equivalent annual compound rate of interest reported to the investor? What would be the annual rate compounded monthly for this investment?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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An investment producing cash flows in the amount of $1,200 per month is undertaken for a period of 28 months. The investor pays $24,000 for the investment and the contract stipulates that investment returns must be reported on a basis equivalent with annual compounding. Given that the
investment is sold after 28 months, what would be the equivalent annual compound rate of interest reported to the investor? What would be the annual rate compounded monthly for this investment?
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