Question

You just invested $7,000 and expect to receive $750 at the end of each of the next five years and an additional "final" payment of $7,000 at the end of the fifth year. What is the expected rate of return on this investment?

Answer 1

A	B	C	D	E	F	G	H	I	J
2
3		Cash Flow will be as follows:
4		Year	0	1	2	3	4	5
5		Cash Flow	($7,000)	$750	$750	$750	$750	$7,750
6
7		The expected return on investment can be found using the rate function as follows:
8
9		Rate(nper,pmt,pv, [fv],type) function of excel can be used to find the Interest rate as follows:
10		NPER	5
11		PMT	$750
12		PV	($7,000.00)
13		FV	$7,000
14
15		Interest rate	10.71%	=RATE(D10,D11,D12,D13)
16
17		Hence interest rate	10.71%
18