Assume That You Own an Annuity That Will Pay You

question 115

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 start a new business,and your uncle offers to give you $92,000 for the annuity.If you sell it,what rate of return would your uncle earn on his investment?

• A) 18.11%
• B) 15.33%
• C) 14.24%
• D) 15.48%
• E) 11.61%

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Definitions:

Current Close

The most recent closing price of a stock or other security.

Reported Yield

The interest or dividends received from an investment, expressed as a percentage of the investment's current market value.

Required Return

The minimum rate of return an investor expects to achieve from an investment, considering its risk.