Econ 3rd Exam-Excel (Product Act Home Insert Page Layout Formulas Data Review Vi

Question

Econ 3rd Exam-Excel (Product Act Home Insert Page Layout Formulas Data Review View Add-ins TEAM 9 Tell me w File General Wrap T Cut Copy Format painter Calibri IEE ge & Center , $ 96 , Blu-lb-16-a- Paste Number Font Clipboard X 03 (25 pts). On December 1, your friend is going to let you borrow his Costco m A1 Q3(25 pts).On December 1, your friend is going to let you borrow his Costco membership card. At Costco, you have the opportunity to buy a year's worth of popcorn for $120. Alternatively, you can buy popcorn every month at Dollar Value. Based on your receipts from last year, you predict that your popcorn purchases will be as follows: Money to be spent on popcorn: 3 Month 4 Dec 5 Jan 6 Feb $16 $13 $16 $14 $17 $19 $16 $14 $15 513 S15 8 Apr 12 Aug 14 Oct 6 Assume that you would make your Dollar Value purchases at the beginning of each month (Dec 1, Jan 1, etc) 8 a) What is the monthly incremental rate of return? h) What is the vearlv intremental rate nf return? Instructions a O Ask me a LG

Explanation / Answer

Let r be the annual incremental rate of return

0=-120+16+13/(1+r/12)+16/(1+r/12)^2+14/(1+r/12)^3+17/(1+r/12)^4+19/(1+r/12)^5+16/(1+r/12)^6+14/(1+r/12)^7+15/(1+r/12)^8+13/(1+r/12)^9+15/(1+r/12)^10+20/(1+r/12)^11

r=111.32%

Monthly rate of return=12*((1+yearly rate of return)^(1/12)-1)

=77.2036%

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