Question

Question 19 1 pts Your insurance agent is trying to sell you an annuity that costs $100,000 today. By buying this annuity, your agent promises that you will receive payments of $384.40 a month for the next 40 years. What is the rate of return on this investment? O 3.45% O 3.47% 3.50% 3.52% 3.55% Question 20

Answer 1

Present Value = Annuity * PVIFA(IRR,40 years)

$100,000 = $384.40 * (r%,480 months)

PVIFA = (1-(1+r)^-n)/r, where
r = interest rate
n = number of period

So r = 0.2875% monthly = 3.45% p.a