Answer:
To calculate the monthly rate on this annuity, we can divide the initial payment of $80,000 by the remaining life expectancy of 20 years, and then divide by 12 months:
Monthly rate = $80,000 / (20 years * 12 months) = $333.33
To calculate the effective annual rate, we can use the formula:
Effective Annual Rate = (1 + Monthly rate)^12 - 1
Plugging in the monthly rate we calculated:
Effective Annual Rate = (1 + 0.02778)^12 - 1 = 0.3586 or 35.86%
So, the monthly rate on this annuity is $333.33 and the effective annual rate is 35.86%.