Question

C. D. Rom has just given an insurance company $34,500. In return, he will receive an annuity of $4,200 for 20 years. At what rate of return must the insurance company invest this $34,500 in order to make the annual payments? (Do not round intermediate calculations)

Answer 1

10.53%

Step-by-step explanation:

In this question, we use the RATE formula that is shown in the attachment. Kindly find it below:

Data provided

Present value = $34,500

Future value or Face value = $0

PMT = $4,200

NPER = 11 years × 2 = 22 years

The formula is shown below:

= Rate(NPER;PMT;-PV;FV;type)

The present value come in negative

So, after solving this, the rate of return is 10.53%