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Your folks just called and would like some advice from you. An insurance agent just called...

Your folks just called and would like some advice from you. An insurance agent just called them and offered them the opportunity to purchase an annuity for ​$29,652.76 that will pay them ​$3,000 per year for 20 ​years, but they​ don't have the slightest idea what return they will be making on their investment of ​$29,652.76. What rate of return will they be​ earning?

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Expert Solution

Let rate of return be x%

At this rate;present value of annuity=29,652.76

29,652.76=3000/1.0x+3000/1.0x^2+...........+3000/1.0x^20

Hence x=rate of return=7.91%(Approx)

jeff jeffy answered 2 years ago
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