MATH SOLVE

2 months ago

Q:
# Your uncle named you beneficiary of his life insurance policy. The insurance company gives you a choice of $100,000 today or a 12-year annuity of $12,000 at the end of each year. What rate of return is the insurance company offering?

Accepted Solution

A:

Answer: 3.085% per yearStep-by-step explanation:P = 100000F = 12*12000 = 144000t = 12144000 = 100000(1 - r)¹²144000/100000 = (1 - r)¹²1.44 = (1 - r)¹²log 1.44 = log (1 - r)¹²log 1.44 = 12 log (1 - r)0.158362 = 12 log (1 - r)0.158362/12 = log (1 - r)0.013197 = log (1 - r)10⁰.⁰¹³¹⁹⁷ = 1 - r1.03085 = 1 - rr = 1.03085 - 1r = 0.03085r = 3.085 %