Question

Assume that you own an investment that will pay you $15,000 per year for 12 years, with the first payment today. You need money today to start a new business, and your uncle offers to give you $120,000 for the investment. If you sell it, what rate of return would your uncle earn on the annuitywould your uncle earn on his investment?

Answer 1

Answer:

8.41%

Explanation:

We have to applied the rate formula that is presented in the attachment.

The NPER  reflects the time period.  

Provided that,  

Present value = $120,000

Future value or Face value = $0

PMT = $15,000

NPER =12 years

The formula is shown below:  

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

After solving this, the rate of return is 8.41%