5. An insurance agent makes this offer: If you pay him $50,000 today, we will pa

Question

5.

An insurance agent makes this offer: If you pay him $50,000 today, we will pay you annual annuity payments of $5,000 for 15 years . If you can earn 5.13% on alternative investments, is this a good deal?

A. Yes, it is a good deal as you earn more than 5.13%

B. No, it is not a good deal because you earn less than 5.13%.

C. Yes, it is a good deal because you will get some money in the future.

A. Yes, it is a good deal as you earn more than 5.13%

B. No, it is not a good deal because you earn less than 5.13%.

C. Yes, it is a good deal because you will get some money in the future.

Explanation / Answer

5. An insurance agent makes this offer: If you pay him $50,000 today, we will pay you annual annuity payments of $5,000 for 15 years . If you can earn 5.13% on alternative investments, is this a good deal?

Rate of return from this Investment = rate(nper,pmt,pv,fv)

Rate of return from this Investment = rate(15,5000,-50000,0)

Rate of return from this Investment = 5.56%

Answer

A. Yes, it is a good deal as you earn more than 5.13%

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