A friend asks you for a loan of $1,000 and offers to pay you back at the rate of $90 per month for 12 months a Using an annual interest rate of 10 , find the net present value (to you) of loaning your friend the money Repeat, using an interest rate of 20 b Find an interest rate that gives a net pre...

a If the annual rate 10 then the monthly periodic rate r 10 12 083 NPV 083 1000 ...

A friend asks you for a loan of $1,000 and offers to pay you back at the

Question:

A friend asks you for a loan of $1,000 and offers to pay you back at the rate of $90 per month for 12 months.
a. Using an annual interest rate of 10%, find the (to you) of loaning your friend the money. Repeat, using an interest rate of 20%.
b. Find an interest rate that gives a of 0. The interest rate for which NPV = 0 is often called the internal rate of return.
Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at...