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?

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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 1 year ago

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