SOLUTION: Kindly could anyone help to solve this problem please? Mike loans Anita 8,200. Anita pays Mike 3,500 at the end of the first year and each year thereafter for a total of 3 payme

Question 949627: Kindly could anyone help to solve this problem please?
Mike loans Anita 8,200. Anita pays Mike 3,500 at the end of the first year and each year thereafter for a total of 3 payments. Mike reinvests the money in his bank account getting 5.0% compound annual interest. What yield did Mike earn over the 3 years (hint-what annual interest rate makes the time value of the cash flows equal)?
Answer by Theo(13342) (Show Source): You can put this solution on YOUR website!
his cash flow and internal rate of return are shown below:

$$$

the solution is that he has earned an internal rate of return of 16.5%.

the cash flows for each year include the interest earned on the payments plus the interest that was re-invested.

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