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Joanne Quick made an investment of $18,787.14. From this investment, she will receive $2,000 annually for...

Joanne Quick made an investment of $18,787.14. From this investment, she will receive $2,000 annually for the next 13 years starting one year from now. Click here to view the factor table Future Value of 1 Click here to view the factor table Future Value of an Annuity of 1 Click here to view the factor table Present Value of 1 Click here to view the factor table Present Value of an Annuity of 1 (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) What rate of interest will Joanne’s investment be earning for her? (Hint: Use Table 4.) (Round answer to 0 decimal places, e.g. 25%.) Rate of interest %

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Answer #1

Answer:

Initial Investment = $18,787.14
Annual Payment = $2,000
Period = 13 years

Let Rate of Return be i%

$18,787.14 = $2,000 * PVA of $1 (i%, 13)
PVA of $1 (i%, 13) = 9.39357

Using table values at n=13, i = 5.00%

Rate of Return = 5.00%

So, Joanne will earn a rate of return of 5.00% on this investment.

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