Question

In: Finance

John Nautilus has $1,200,000 and wants to retire. What return must his money earn so he...

John Nautilus has $1,200,000 and wants to retire. What return must his money earn so he may receive annual benefits of $80,000 at the end of each year for the next 30 years?

5.22% A

5.72% B

8.24% C

10% D

Solutions

Expert Solution

Present Value Of An Annuity
= C*[1-(1+i)^-n]/i]
Where,
C= Cash Flow per period
i = interest rate per period
n=number of period
$1200000= $80000[ 1-(1+i)^-30 /i]
1200000/80000 =[ 1-(1+i)^-30 /i]
15 =[ 1-(1+i)^-30 /i]
i=5.22%
Correct Option : A.5.22%

jeff jeffy answered 3 years ago
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