- Project B The Investor Deposits 150 000 For Two Years In A Bank Account Where The Effective Interest Rate For The Firs 1 (41.78 KiB) Viewed 36 times
caculation.
Project B: The investor deposits £150,000 for two years in a bank account where the effective interest rate for the first year is 7% and for the second year is 6%. The investor receives interest at the end of each month for two years and then withdraws the initial capital at the end. () How much profit has the investor made in each investment project? For this question, the profit is defined to be how much more money the investor has at the end of the project compared to the amount £150,000) before it starts. (ii) For each project, write down the formula for the net present value of the investment at time t = 0. Your formula should be in terms of the interest rate i only, so it should not contain symbols like v, ż(12) and ani. (ii) Compute the net present value for i = 0.01 and i = 0.10 for each project and use linear interpolation to approximate the internal rate of return for the two investments. One round of linear interpolation is sufficient (iv) Compare these two projects – which one would you advise the investor to select? Give a clear argument that supports your choice, using the calculations you have already done.