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8 February, 09:09

If a person invests $100,000 now and receives $4,000 per quarter for 10 years, the nominal rate of return per year is nearest to:

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  1. 8 February, 10:38
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    With the present amount invested, P, the value received for n pay-out periods is calculated through the equation,

    P = A x (1 - (1 / (1 + r) ^n)) / r)

    Substituting the known values,

    100,000 = (4,000) (1 - (1 / (1 + r) ^40)) / r)

    The value of r from the equation is 0.3999 or 0.4. Hence, the nominal rate per year is equal to 1.6.
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