# What is the annual yield (internal rate of return) of the investment if John purchases the property... 1 answer below »

John is considering the purchase of a lot. He can buy the lot today and expects the price to rise to $15,000 at the end of 10 years. He believes that he should earn an investment yield of 10 percent annually on this investment. The asking price for the lot is$7,000. Should he buy it? What is the annual yield (internal rate of return) of the investment if John purchases the property for $7,000 and is able to sell it 10 years later for$15,000? Please show all the required step in your answer.

Sukhjit S

First we have to calculate the present value of $15,000 at the end of 10 years. PV =? FV=$15,000

r = 10% or 0.10

n = 10 years or 10

PV= FV / (1+r)^n

PV = \$15,000 / (1+0.10)^10 =...

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