What interest rate are you earning on an annuity that pays you $1,900 a year for six years if you paid $8,500 for it?
Present value of annuity = Annuity * PVFAr%,6years
8500 = 1900*PVFA
PVFA = 4.474
looking at present value table
When 9% INTEREST RATE PVFA= 4.486
When 10% Interest Rte the PVFA = 4.355
Finding rate by interpolation:-
= Low % + {(high-original)/(high-low)}
= 9 + (0.01/0.131)
=9 + 0.08
= 9.08%
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