You are examining an investment opportunity. It would require you to pay money today and then receive payments semi-annually from that investment. Since the payments you expect to receive are semi-annual, you would like to know your semi-annual version of your own required return. You require 10% per year. What semi-annual rate (i. e. periodic return per six months) do you require (i. e. need to earn such that this implies 10% earned per year when you get to compound semi-annually) ? g

Question

Mariah Hinton

Business

5 June, 01:54

You are examining an investment opportunity. It would require you to pay money today and then receive payments semi-annually from that investment. Since the payments you expect to receive are semi-annual, you would like to know your semi-annual version of your own required return. You require 10% per year. What semi-annual rate (i. e. periodic return per six months) do you require (i. e. need to earn such that this implies 10% earned per year when you get to compound semi-annually) ? g

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Answers (1)

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Brock Bass · Answer 1

The semi annual rate is 4.88%

Explanation:

semi annual rate = [ ((1+r) ^ (1/n)) - 1]

= [ ((1+10%) ^ (1/2)) - 1]

= 4.88%

Therefore, the semi-annual rate (i. e. periodic return per six months) do you require (i. e. need to earn such that this implies 10% earned per year when you get to compound semi-annually) is 4.88%.