Nick invests $50 000 today and the fund guarantees an annuity of $12 345 for six years.What is the approximate rate of return?
A)11.6 percent
B)8)0 percent
C)12.5 percent
D)Insufficient information to calculate

Question

Quizplus · Accepted Answer

The rate of return can be calculated using the present value of an annuity formula. By solving for the interest rate that equates the present value of the annuity payments ($12,345 for 6 years) to the initial investment ($50,000), the approximate rate of return is found to be 12.5 percent.

Nick Invests $50 000 Today and the Fund Guarantees an Annuity