Determine the better investment

Reference no: EM1339584

You would like to invest in one of the following assets. Use the present value of an annuity formula and the trial and error method to estimate the Internal Rate of Return or yield for each of the following two investments and decide which is the better investment.

A B

Initial Investment $8,500 $9,500

Income at Year End

Income: Year 1 $2,500 $2,000

Income: Year 2 $2,500 $2,500

Income: Year 3 $2,500 $3,000

Income: Year 4 $2,500 $3,500

Income: Year 5 $2,500 $4,000

Reference no: EM1339584

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