Personal Finance Problem Interest rate for an annuity April Bartrick has just received an inheritance of $1,000,000. She
Posted: Tue Apr 26, 2022 10:29 am
Personal Finance Problem
Interest rate for an annuity April Bartrick has just received an
inheritance of $1,000,000. She plans to invest the entire sum in an
annuity, paying at the end of each year for the next 20 years. Two
personal bankers suggest different long-term, fixed income
instruments that she can invest in. However, the annual payment
from the first investment is $94,393 and $117,459 from second
investment.(Please write detailed steps)
a. What is the rate of return offered by the two investments
(rounded off to the
nearest whole percent)?
b. April is willing to settle for an annuity that carries an
interest rate assumption of
9% per annum. What minimum annual payment would be acceptable
for her?
Interest rate for an annuity April Bartrick has just received an
inheritance of $1,000,000. She plans to invest the entire sum in an
annuity, paying at the end of each year for the next 20 years. Two
personal bankers suggest different long-term, fixed income
instruments that she can invest in. However, the annual payment
from the first investment is $94,393 and $117,459 from second
investment.(Please write detailed steps)
a. What is the rate of return offered by the two investments
(rounded off to the
nearest whole percent)?
b. April is willing to settle for an annuity that carries an
interest rate assumption of
9% per annum. What minimum annual payment would be acceptable
for her?