Assume That You Own an Annuity That Will Pay You

question 148

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.You need money today to open a new restaurant, and 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) 7.99%
• E) 8.41%

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Definitions:

Effective Percent

The portion, expressed as a percentage, that represents the efficiency or effectiveness of a given process, treatment, or action.

People

Human beings collectively, often referred to within the context of society, communities, or groups.

Mania

A mental state characterized by extremely elevated mood, energy, and activity, often associated with bipolar disorder.

Depression

A continual emotional disorder characterized by feelings of gloom or apathy towards activities, significantly impairing regular life functions.