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29 April, 17:53

An investment will pay $202,000 at the end of next year for an investment of $182,000 at the start of the year. If the market interest rate is 7.9% over the same period, should this investment be made

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  1. 29 April, 18:01
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    The first investment is more profitable than the general market interest rate.

    Explanation:

    Giving the following information:

    An investment will pay $202,000 at the end of next year for an investment of $182,000 at the start of the year. The market interest rate is 7.9% over the same period.

    To compare both options, we need to calculate the final value of investing the $182,000 in other investment that pays a 7.9% interest rate.

    We need to use the following formula:

    FV = PV * (1+i) ^n

    FV = 182,000 * (1.079) = $196,378

    The first investment is more profitable than the general market interest rate.
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