An insurance agent called your folks and offered them an opportunity to purchase an annuity for...

An insurance agent called your folks and offered them an opportunity to purchase an annuity for $8,531.03 that will pay them $1,000 per year for 20 years. What would they be making on there investment of $8,531. What tate of return would they earn?
The annual rate of return your folks would earn on their investment is __%.
(round to two decimal places)

Solutions

Expert Solution

Let rate of return be x%

At this rate;present value of annuity=8,531.03

8,531.03=1,000/1.0x+1,000/1.0x^2+.............+1,000/1.0x^20

Hence x=rate of return=9.97%(Approx).

jeff jeffy answered 2 years ago

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