Question

One investor is trying to derive the implied discount rate by comparing an annuity and an annuity due. Assume that the future value of the annuity is $49,081.00, and the future value of the annuity due is $52,169.00. All the other information regarding these two investments are similar, what's the implied discount rate

Answer 1

the implied discount rate is 6.29%

Step-by-step explanation:

The computation of the implied discount rate is shown below;

= (Future value of an annuity due ÷ future value of annuity) - 1

= ($52,169 ÷ $49,081) - 1

= 6.29%

Hence, the implied discount rate is 6.29%

We simply applied the above formula for the same and the same is relevant