Q: Doris Wade purchased a condominium for $50,000 in 1987. Her down payment was $20,000. She financed the remaining amount as a $30,000, 30-year mortgage at
Doris Wade purchased a condominium for $50,000 in 1987. Her down payment was $20,000.
She financed the remaining amount as a $30,000, 30-year mortgage at 7%, compounded monthly.
Her monthly payments are $200. It is now 2007 (20 years later) and Doris has sold the condominium for $100,000, immediately after making her 240th payment on the unit.
Her effective annual internal rate of return on this investment is closest to which answer below?
(A) 3.6%
(B) 8.5%
(C) 5.3%
(D) 1.5%
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