Assume That You Own an Annuity That Will Pay You

question 89

Multiple Choice

Assume that you own an annuity that will pay you $15,000 per year for 12 years,with the first payment being made today.Your uncle offers to give you $120,000 for the annuity.If you sell it,what rate of return would your uncle earn on his investment?

• A)6.85%
• B)7.21%
• C)7.59%
• D)8.41%

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Definitions:

Personal Liability

The legal responsibility of an individual to personally satisfy debts or liabilities incurred, including those arising from actions taken in a professional capacity.

Capital Investment

Funds invested in a business for the purposes of further growth, operational development, or acquisition of long-term assets.

Joint Venture

A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task or business activity.

Differences

The distinct characteristics or features that set one thing apart from another.