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  3. 2a. over a two year time horizon an investor exper

2a. Over a two year time horizon an investor experiences the following net cash flows:...

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Finance

  1. 2a. Over a two year time horizon an investor experiences the following net cash flows:

Year

0

1

2

Cash flow

-$8,000

$5,280

$5,320

What is the internal rate of return for the investor?

Demonstrate that a bank deposit offering an annual rate equal to the internal rate of return can replicate the above set of cash flows for the investor.

(7 marks)

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