Compute either their expected rate of return or duration

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Consider the case of the following annuities, and the need to compute either their expected rate of return or duration. David needed money for some unexpected expenses, so he borrowed $7,232.97 from a friend and agreed to repay the loan in seven equal installments of $1,250 at the end of each year. The agreement is offering an implied interest rate of David's friend, Sagar, wants to go to business school. While his father will share some of the expenses, Sagar still needs to put in the rest on his own. But Sagar has no money saved for it yet. According to his calculations, it will cost him $54,892 to complete the business program, including tuition, cost of living, and other expenses. He has decided to deposit $4,800 at the end of every year in a mutual fund, from which he expects to earn a fixed 10% rate of return. It will take approximately years for Sagar to save enough money to go to business school.

Reference no: EM131834976

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