Answer:
The rate of return for the investor is 4.95 %.
Step-by-step explanation:
The required rate of return can be determine with the help of IRR formula given below. To use the formula first we have to calculate NPV using one two rates that is 5% and 10%.
NPV (5%)= (-$1,054.47) +(1000*7%*0.952) + ($1,037.19*0.952)
= -0.42512
NPV (10%) = (-$1,054.47) +(1000*7%*0.909) + ($1,037.19*0.909)
=-48.03
IRR= 5% + (-0.43)/-0.43+48.03) * (10%-5%)
= 4.95 %
