5 pts Question 1 An investment of 115000 today will pay 10 a

5 pts Question 1 An investment of $115,000 today, will pay 10 annual payments of $17,500 each. Compute the rate of return on this investment to the second decimal place. 8.47 8.23 8.83 8.67

Solution

Let the rate of return be x%

At this rate;present value of annual payments=115000

115000=17500/1.0x+17500/1.0x^2+...............+17500/1.0x^10

Hence x=rate of return=8.47%(Approx).