Answer:
3.51%
Step-by-step explanation:
From the given information:
For the first stream, the present value can be computed as:
[tex]= 100 +\dfrac{200}{(1+i)^n}+ \dfrac{300}{(1+i)^{2n}}[/tex]
Present value for the second stream is:
[tex]=\dfrac{600}{(1+i)^{10}}[/tex]
Relating the above two equations together;
[tex]100 +\dfrac{200}{(1+i)^n}+ \dfrac{300}{(1+i)^{2n}} =\dfrac{600}{(1+i)^{10}}[/tex]
consider [tex]v = \dfrac{1}{1+i}[/tex], Then:
[tex]\implies 100+200v^n + 300v^{2n} = 600 v^{10}[/tex]
where:
[tex]v^n = 0.75941[/tex]
Now;
[tex]\implies 100+200(0.75941) + 300(0.75941))^2 = 600 (v)^{10}[/tex]
[tex](v)^{10} = \dfrac{100+200(0.75941) + 300(0.75941))^2 }{600}[/tex]
[tex](v)^{10} = 0.7082[/tex]
[tex](v) = \sqrt[10]{0.7082}[/tex]
v = 0.9661
Recall that:
[tex]v = \dfrac{1}{1+i}[/tex]
We can say that:
[tex]\dfrac{1}{1+i} = 0.9661[/tex]
[tex]1 = 0.9661(1+i) \\ \\ 0.9661 + 0.9661 i = 1 \\ \\ 0.9661 i = 1 - 0.9661 \\ \\ 0.9661 i = 0.0339 \\ \\ i = \dfrac{0.0339}{0.9661} \\ \\ i = 0.0351 \\ \\ \mathbf{i = 3.51\%}[/tex]
