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New Jersey Mutual has offered you a single premium annuity that will pay you $12,000 per year (end of year) for the next 15 years. If you must pay $109,296 today for this annuity, what is your expected
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New Jersey Mutual has offered you a single premium annuity that will pay you $12,000 per year (end of year) for the next 15 years. If you must pay $109,296 today for this annuity, what is your expected rate of return?

User Nathaniel Gentile
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1 Answer

2 votes

Answer:

7%

Step-by-step explanation:

The Present value of this single annuity= $109295.

$amount of each annuity= 12000.

By estimation, if we take interest rate(r) =0.07 or 7% in annuity factor formula it will be ((1-(1/(1+0.07)^15))/0.07)=9.1079.

Now, 109295/12000 =9.1079. So, here answer will be 7%

User Voxeloctree
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