For $10,000 You Can Purchase a 5-Year Annuity That Will

question 33

Multiple Choice

For $10,000 you can purchase a 5-year annuity that will pay $2504.57 per year for five years. The payments are made at the end of each year. Calculate the effective annual interest rate implied by this arrangement: (approximately)

• A) 8%
• B) 9%
• C) 10%
• D) None of the above

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Definitions:

Transaction

A transaction is an agreement between a buyer and a seller to exchange goods, services, or financial instruments.

Black Rhinos

A critically endangered species of rhinoceros native to eastern and southern Africa, known for their distinctive hooked lip.

Eco-Tourism

Responsible travel to natural areas that conserves the environment, sustains the well-being of the local people, and involves interpretation and education.

Extinction

The process by which a species, genus, or family of organisms ceases to exist through death or inability to reproduce in its natural environment.