Question

Ruby owns two investments, A and B, that have a combined total value of 149,366 dollars. Investment A is expected to pay 7,977 dollars per year forever; its next payment is expected in 1 year; and its expected return is 10.55 percent per year. Investment B is also expected to make annual payments forever and make its next payment in 1 year. Investment B’s next payment is expected to be 4,440 and all subsequent payments are expected to grow by 4.16 percent per year forever. What is the annual expected return for investment B?  Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.

Answer 1