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Compute the amount of the unrecovered investment

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To get started in a new telecommuting position with AB Hammond Engineers, Jane took out a $1000 loan at i _ 10% per year for 4 years to buy home office equipment. From the lender's perspective, the investment in this young engineer is expected to produce an equivalent net cash flowsof $315.47 for each of 4 years.

A = $1000( A=P ,10%,4) = $315.47

This represents a 10% per year rate of return on the unrecovered balance. Compute the amount of the unrecovered investment for each of the 4 years using ( a ) the rate of return on the unrecovered balance (the correct basis) and ( b ) the return on the initial $1000 investment. ( c ) Explain why all of the initial $1000 amount is not recovered by the final payment in part ( b ).

Reference no: EM13881727

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