Suppose you purchased an income producing property for $95,000 five years ago. In Year 1, you were able to negotiate a lease that paid $10,000 per year at the end of each year. If you are able to sell the property at the end of year 5 for $100,000 (after receiving our final lease payment), what was the internal rate of return (IRR) on this investment

The internal rate of return of this investment is 9.57%

Explanation:

we already told that the property investment was $95000 initially then the the value of the property appreciated to $100000 in 5 years so we will use both these amounts to get what is the rate of return in this investment so we will use the future value formula :

Fv = Pv(1+i)^n

where Fv is the future value of the investment   $100000+ $50000=$150000( we also considered the lease amount of $10000 per year for 5 years which is $50000)

Pv is the present value of the investment $95000

IRR is the internal rate of return for the investment which we will calculate

n is the period of 5 years in which the investment was done in

therefore we will substitute the above mentioned values to the formula also mentioned above and solve for IRR:

150000= 95000(1+IRR)^5 then we divide by 95000 both sides

150000/95000= (1+IRR)^5 then we get the 5th root of both sides

1.095654258 = 1+ IRR then we subtract 1 from both sides

0.095654258 = IRR then we multiply by 100 for a percentage

9.57% = IRR which this is the internal rate of return for the investment. rounded off to two decimal places.

the specific actions take by the fed. what the fed was attempting to do by taking these actions. the result of the actions taken by the fed

the investment was $14,174.196

explanation:

a lump sum means that the father of the example made one deposit and leave it be.

we need to know the value of a capital that generated at 4.05% per year during 28 years the sum of $48,613.24

now clearing the formula to solve for capital we got:

and we reach the answer investment = $14,174.20