An Insurance Firm Agrees to Pay You $3,310 at the End

question 106

Multiple Choice

An insurance firm agrees to pay you $3,310 at the end of 20 years if you pay premiums of $100 per year at the end of each year of the 20 years.Find the internal rate of return to the nearest whole percentage point.

• A) 9%
• B) 7%
• C) 5%
• D) 3%
• E) 11%

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Definitions:

Balancing the Budget

The process of adjusting income and expenditure so that they equal each other, resulting in neither a budget deficit nor a surplus.

Money Supply

The total amount of monetary assets available in an economy at a specific time, including cash, bank deposits, and other liquid assets.

Expansionary Monetary Policy

A monetary policy approach used by central banks to increase the money supply and lower interest rates, aiming to stimulate economic growth.

Classical Economics

A school of thought in economics that emphasizes the importance of free markets, competition, and the self-regulating nature of economies.