Attention: Due to a bug in Google Chrome, this page may not n correctly. Click h

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Attention: Due to a bug in Google Chrome, this page may not n correctly. Click here to learn more. 8. Implied interest rate and period Aa Aa Consider the case of the following annuities, and the need to compute either their expected rate of return or duration. Daniel inherited an annuity worth $4,535.61 from his uncle. The annuity will pay him four equal payments of $1,400 at the end of each year. The annuity fund is offering a return of 7.83% 9.00% 10.62% Daniel's friend, lan, has hired a financial planner for advice on r 12.15% ns dering lan's current expenses and expected future Iifestyle changes, the financial planner has stateu tnat once Ian crosses a threshold of $6,501,363 irn savings, he will have enough money for retirement. Ian has nothing saved for his retirement yet, so he plans to start depositing $40,000 in a retirement fund at a fixed rate of 9.00% at the end of each year. It will take years for Ian to reach his retirement goal. 33 34.1 2004-201 Hi Type here to search

Explanation / Answer

1.) Present value = PMT times (present value annuity factor = n = 4, i = ?)

4535.61 = 1400 (PVA factor n = 4, i = ?)

4535.61/ 1400 = PVA factor n = 4, i = ?

3.24 = PVA factor n = 4, i = ?

Now check this from present value annuity table in column states n= 4 and corresponding value is near 3.24

Answer = 9%

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