Question
In: Finance
Your insurance agent is trying to sell you an annuity that costs $60,000 today. By buying...
Your insurance agent is trying to sell you an annuity that costs $60,000 today. By buying this annuity, your agent promises that you will receive payments of $475 per month for 15 years. What is the rate of return expressed as an APR on this investment?
Solutions
Expert Solution
| c= Cash Flow | $ 475.00 | |
| i= Interest Rate | i | |
| n= Number Of Periods | 180 | |
| 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 | ||
| 60000= $475[ 1-(1+i)^-180 /i] | ||
| i = 0.00418 i.e. 0.418% | ||
| APR =0.418%*12 | ||
| =5.02% |
jeff jeffy answered 2 years agoRelated Solutions
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