Kuley owns two investments, A and B, that have a combined total value of $73.600. Investment A is expected to pay $53,000 in 5 years from today and has an expected return of 8.41 percent per year. Investment B is expected to pay $61,400 in 8 years from today and has an expected return of R per year. What is R, the expected annual return for investment B

Solution :

The present value is given by :

Here r = interest rate per period

        n = number of periods

Particulars               Amount

Future value           $ 53,000

Interest rate              8.41%

Periods                        5

The present value is :

      = $ 35,393.96

Therefore, the value of investment A is $ 35,393.96

The value of investment of B =  Combined value - value of A

                                                 =  $ 73600 - $ 35393.96

                                                 =  $ 38,206.04

The Future Value

Particulars                  Amount

Present value           $ 38,206.04

Future value             $ 61,400

Periods                        8

Therefore, the future value is :

(1 + r) = 1.061096

r =   1.061096 - 1

r  =   0.061096  

r = 6.1096 %

Therefore, the interest rate per annum is 6.1096%

if i need to borrow money for anything, it would be for something like a house or an apartment but, that depend on the situation.

is this good enough?