What is the expected ear of the 60000 equity investment

Reference no: EM13305343

You have been offered following risky investment, invest 100000 today, and you will have the following positive expected future cash flows: 1968 per month for the next 60 months (at the end of each month) and an additional 25746 at the end of 60 months.

Now suppose you have only 60000 you can invest, but you can borrow the other 40000 needed to make the risky investment given above. The loan for the 40000 will be a 7.8% APR installment loan, with monthly payments what is the expected EAR of the 60000 equity investment?

Reference no: EM13305343

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