The rate of return earned on an investment of $50,000 today that guarantees an annuity of $10,489for six years is approximately
A) 30%.
B) 7%.
C) 5%.
D) none of the above

Question

Quizplus · Accepted Answer

The rate of return can be calculated using the formula for the present value of an annuity. Solving for the interest rate that equates the present value of the annuity payments ($10,489 per year for 6 years) to the initial investment ($50,000) gives approximately 7%.

The Rate of Return Earned on an Investment of $50,000