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In: Finance

C. D. Rom has just given an insurance company $32,500. In return, he will receive an...

C. D. Rom has just given an insurance company $32,500. In return, he will receive an annuity of $3,800 for 20 years.  
At what rate of return must the insurance company invest this $32,500 in order to make the annual payments? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
  

Rate of Return ____________ %

Solutions

Expert Solution

Present Value = $32,500

Annual Payment = $3,800

Time Period = 20 years

Calculating Interest Rate,

Using TVM Calculation,

I = [PV = 32,500, FV = 0, PMT = 3,800, T = 20]

I = 9.93%

jeff jeffy answered 2 years ago
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