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An insurance company is offering an annuity product that costs$30,000 today and entitles you to...

An insurance company is offering an annuity product that costs $30,000 today and entitles you to receive ten annual payments of $3,750 from the insurance company. What interest rate is embedded in the pricing of this annuity product?

Solutions

Expert Solution

The interest rate is found using the annuity formula

Solve for r using a financial calculator

N = 10

PV = -30,000

PMT = 3,750

FV = 0

CPT I/Y

I/Y = 4.2775

The interest rate is 4.2775%

jeff jeffy answered 2 years ago
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