Question

Bette has a life insurance policy that will pay her family $40,000 per year if

she dies. Bette's insurance company expects that it would have to put
$2,500,000 into a bank account so that it could make the payments. What
does Bette's insurance company expect the interest rate to be?

Answer 1

1.6%

Explanation:

Solve for r

40,000=(2,500,000)(r/100)(1)

40,000=(25,000)r

r=40,000/25,000

r=1.6