Solve for SFR

[Joseph Graydon]

Hi

Can anyone show how to reach the answer for SFR2 and SFR3 please?

I can get to SFR2/1.03 + SRF2/1.04^2 = 0.07544 but cannot see how to solve to 3.98%

 

[Steven G]

Factor out SFR2 from SFR2/1.03 + SRF2/1.04^2 = 0.07544 and then divide by the coefficient of SFR2.
Was it a typo that you had SFR2 and SRF2 in the equation above.
Post back with your work!

 

[Joseph Graydon]

Hi Jomo
Thanks for the response. Yes the SFR2 and SFR2 is not a typo, its is a direct take from the text I'm using.

I tried multiplying both sides by SFR2/1.03 and SFR2/1.04^2 and then end up with 0.07544 x 2SFR2 and get 4.20%

I don't know how to factor out SFR2, I have tried watching you tube videos but I cannot find anything to explain the steps. SFR is what I'm trying to solve for so I don't understand what you mean when you say divide by SFR2?

I am really struggling with this even though its probably very simple. I have an exam in December for CFA and a lot of other material to work through so if possible I'm hoping someone can show me the steps to get to the answer in this case. It is really getting me down I can't work this out.

 

[Joseph Graydon]

Hi Jomo,

Am I correct in saying that to factor out SFR2/1.03 + SFR2/1.04^2 (or 1.0816) you expand this to SFR * (1/1.03 + SFR/1.0816) because SFR2 is the common numerator so this is the same as dividing SFR2 by the denominator?

I;m not sure I fully understand why that's the expansion but it looks as though it gets the correct answer.

 

[Steven G]

For example if you have 3SFR2 + 5SFR2 this factors to (3+5)SFR2.