Assume that a customer shops at a local grocery store spending an average of $20

Question

Assume that a customer shops at a local grocery store spending an average of $200 a week, resulting in the retailer earning a $10 profit each week from this customer. Assuming the shopper visits the store all 52 weeks of the year, calculate the customer lifetime value if this shopper remains loyal over a 10-year life-span. Also assume a 3 percent annual interest rate and no initial cost to acquire the customer.

This customer yields $( ) per year in profits for this retailer. (Round to the nearest dollar.

What's the answer for ( )?

Explanation / Answer

Current yield:par value* coupon rate/current price* maturity period

Here par value be 200

Coupon rate be 3%

Current price be 10

Maturity period be 10 years

Current yield: 200*3/10*10

: 60%

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