Peter borrows $5,000 from Kevin for a term of 5 years=2E Peter agrees to pay=20=
interest at the end of each year at an effective annual rate of 8% and to repay=20=
the entire $5,000 as a lump sum at the end of 5 years=2E Immediately after the=20=
third payment, Kevin sells the right to future payments to Martha at a price=20=
that will yield Martha an effective annual rate of return of 5%=2E Determine=20=
Kevin's overall yield rate=2E
Here's what I get=2E The price that yields a 5% return for Martha is $5,278=2E91=
=20=
(PV of payments of $400 in one years time and $5,400 in two years time at 5%)=2E=20=
=20=
Then you just need to find i such that $5,000 =3D $400 a|3 +=20=
$5,278=2E91(1+i)^(-3)=2E You can use trial and error, or using the BA-35=20=
calculator enter N=3D3, PMT=3D400, PV=3D5,000, and FV=3D5,278=2E91 then push CPT=20=
and i to=20=
get Kevin's yield of 9=2E69%=2E