As a financial question, something is missing from your problem. You
don't mention a prevailing risk-free interest rate, so it's not
possible to calculate the present value of this cash flow. However, If
you intend to find the prevailing interest rate that would make this a
break-even investment, try the following
>fsolve(@(r) 200*(1+r)^3+300*(1+r)^2+400*(1+r)+500-1000*(1+r)^4,0)
If this investment is risk-free, I'd jump on it!
On 03/16/2010 12:51 PM, Julien Martin wrote:
Sorry. I made a mistake here...
Thank you all for your input!!!
Julien.
2010/3/16 Stefan Neumann <address@hidden>
Hello,
I am trying to determine an interest rate by solving the following
equation:
fsolve(@(r)
200*(1+r)^(4)+300*(1+r)^(3)+400*(1+r)^(2)+500*(1+r)^(1)-1000,0)
What really puzzles me is that Octave will not give me a solution that
makes sense: it gives me a negative interest rate!!
In plain English, the problem is as follows: one invests 1000$ at year
1, and receives 200 at year 2, 300 at year 3, 400 at year 4 and 500 at
year 5.
I have to find out the interest rate of this investment...
Can anyone please help?
Thanks in advance,
Julien.
You calculated:
Save 200 for 4 years
save 300 for 3 years
save 400 for 2 years
save 500 for 1 year
In the end have 1000 on your account.
If you put in 1400 and get 1000 in the end, you lose. That is why your
interest is negative.
stn
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