(Annuity interest rate) 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 $23,436.06 that will pay them $2,500 per year for 20 years. They don't have the slightest idea what return they would be making on their investment of $23,436.06. What rate ofreturn would they be earning? The annual rate of return your folks would be earning on their investment is %. (Round to two decimal places.)
(Annuity interest rate) 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 $23,436.06 that will pay them $2,500 per year for 20 years. They don't have the slightest idea what return they would be making on their investment of $23,436.06. What rate ofreturn would they be earning? The annual rate of return your folks would be earning on their investment is %. (Round to two decimal places.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:(Annuity interest rate) 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 $23,436.06 that will pay them $2,500 per year for 20 years
They don't have the slightest idea what retufn they would be making on their investment of $23,436.06: What rate of return
would they be earning?
The annual rate of return your folks would be earning on their investment is
%. (Round to two decimal places.)
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F5
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Expert Solution
Step 1
An annuity refers to a series of equal and regular payments or receipts at fixed intervals. The value of an annuity is the discounted value of all future cash flows receivable from it.
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