What's the Rate of Return You Would Earn If You

question 74

Multiple Choice

What's the rate of return you would earn if you paid $950 for a perpetuity that pays $85 per year?

• A)6.52%
• B)7.25%
• C)8.95%
• D)9.84%

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Definitions:

Guaranteed Annual Rate

The minimum annual return promised to an investor by an investment product, regardless of market conditions.

Fixed Rate

An interest rate that remains the same throughout the entire term of a loan, investment, or financial product.

Stocks

Shares of ownership in a company that entitle the holder to a claim on part of the company’s assets and earnings.

Present Value

The current-day worth of an anticipated future money amount or cash flow sequences, calculated using a particular rate of return.