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)

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andromache andromache · Answer 1 · 2020-02-27T11:10:36+01:00

Answer:

10.53%

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%

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