Homework: Homework 3 Score: 0 of 10 pts P6-16 (similar to) Save 13 of 22 (9 comp

Question

Homework: Homework 3 Score: 0 of 10 pts P6-16 (similar to) Save 13 of 22 (9 complete) HW Score: 38.36%, 80 of 220 pt Question Help * Annuity interest rate) Your folks just called and would like some advice from you. An insurance agent just called them and offered them the opportunity to purchase an annuity for $17,626.11 that will pay them $3,500 per year for 10 years. They don't have the slightest idea what return they would be making on their investment of $17,626 11 What rate of return would they be earning? The annual rate of return your folks would be earning on their investment is % (Round to two dome places

Explanation / Answer

Let the rate of return they are making is r

Now, we know that the present value is $17626 and PMT = $3500 for 10 years. So input the same in the financial calculator

PV = $17626; PMT = $3500; n=10, FV =0; Calculate 1/y = 14.91%

Hence annial rate of return would be earning 14.91% on the investment.

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