Question

An investment is made in the amount of $26,000 and the contract calls for investment returns to be reported as compounded annually. Monthly cash flows of $400 are received for 12 months. What is the annual return on the investment?
A) 19.62%
B) 20.15%
C) 20.65%
D) 22.84%

Answer 1

Answer:

A) 19.62%

Explanation:

We have to use the RATE formula which is shown in the attachment below:

The NPER represents the time period.  

Provided that,  

Present value = $26,000

Assuming figure - Future value or Face value = $0

PMT = $400

NPER = 12 months

The formula is shown below:  

= -Rate(NPER;PMT;-PV;FV;type)  

The present value come in negative

So, the annual return on the investment is 19.62%