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You Have Two Ways to Invest $1 000 000 You

Question 36

Essay

You have two ways to invest $1 000 000 you won in a lottery: (i)to buy government bonds that earn 4% annually, or (ii)to buy an apartment building that brings you $100 000 per year in revenues. Compare the two options in terms of their internal rates of return.

Correct Answer:

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The IRR of the first option is 4%. The I...

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