Question

James inherited an annuity worth $4653.59 from his uncle. The annuity will pay him six equal payments of $1,100 at the end of each year. The annuity fund is offering a return of_______.

a)9.5%
B) 12.98%
c) 14.85%
d) 11%

Answer 1

d) 11%

Step-by-step explanation:

In order to compute the rate of return, we have to use the RATE formula which is presented in the attachment below:

Given that,

Present value = $4,653.59

Future value or Face value = $0

PMT = $1,100

NPER = 6 annual payments

The formula is shown below:

= Rate(NPER,PMT,-PV,FV,type)

The present value come in negative

So, after solving this, the rate is 11%