Question

Interest rate with annulty. What are you getting in lerms of imterest rate if you are willing to psy $13,000 today for an annual stream of payments of $2,300 for the next 10 years? The nitxt 20 years? The next 50 years? Forever? What are you gettirg in terms of interest rate it you ace willing to pay $13,000 today for an annual stream of payments of $2,300 for the next 10 yoars? (Round to two decimal places.) What are you getting in terms of interest rate if you are willing to pay $13,000 today for an annual stream of poyments of $2,300 for the next 20 yearm? (Round to two decimal placest) What are you getting in torms of inserest rate if you are waing to pay $13,000 boday for an annuat steam of payments of $2,300 for the next 50 yoars? (Round to two dedimal places.) What are you geting in teent of intorest rate if you are waling to pay $13.000 todiy for an anmal stream of payments of 52.300 forever? (Round to two decimal places.)

Answer 1

To calculate the interest rate, we need to find the present value of the stream of payments and compare it to the initial investment. For the next 10 years, the interest rate is approximately 5.93%.

Step-by-step explanation:

To calculate the interest rate, we need to find the present value of the stream of payments and compare it to the initial investment. Let's calculate the interest rate for each scenario:

For the next 10 years:

The present value of the stream of payments is $13,000, and the annual payment is $2,300 for 10 years.

Using the present value formula, we can calculate the interest rate:

PV = PMT * ((1 - (1 + r)^(-n)) / r)

$13,000 = $2,300 * ((1 - (1 + r)^(-10)) / r)

This equation can be solved using financial calculators or software to find that the interest rate is approximately 5.93%.