Question

Given the following end-of-year cash flows, what is the implicit discount rate if the PV is...

Given the following end-of-year cash flows, what is the implicit discount rate if the PV is $2,020?

Year

Cash Flow

1

$500

2

$750

3

$1,000

Choose one of the following answers

4.50%

4.80%

5.00% This is correct but how do we know?

5.40%

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