A plaintiff in a successful lawsuit was awarded a judgment of $4800 per month for 5 years. The plaintiff has the need of a fairly large sum of money immediately for an investment of his own, and has offered the defendant the opportunity to pay off the award in a lump-sum amount of $110,000. If the defendant accepts the offer and pays the $110,000 now, what rate of return will the defendant have made by not paying the 60 monthly amounts?

What will be an ideal response?


0 = -110,000 + 4800(P/A,i%,60)
(P/A,i*%,60) = 22.9167
Use interpolation or spreadsheet
i* = 3.93% per month

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