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 rat
e of return must the insurance company invest this $34,500 in order to make the annual payments? (Do not round intermediate calculations)
1 answer:
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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