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Assume That You Own an Annuity That Will Pay You

question 148

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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?


Definitions:

Income

The sum of funds earned, often periodically, from employment or investment returns.

Demand Function

A mathematical equation that describes the relationship between the quantity of a good demanded and its price, along with other factors like income and price of related goods.

Consumer's Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service and the total amount that they actually do pay.

Mead

A fermented beverage made from honey, water, and sometimes various fruits, spices, grains, or hops.

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