American_Bankers_Association
CTFA · Question #271
For $1,000 you can purchase a 5-year ordinary annuity that will pay you a yearly payment of $263.80 for 5 years. The compound annual interest rate implied by this arrangement is closest to:
The correct answer is C. 10%. See the full explanation below for the reasoning.
Investment Management
Question
For $1,000 you can purchase a 5-year ordinary annuity that will pay you a yearly payment of $263.80 for 5 years. The compound annual interest rate implied by this arrangement is closest to:
Options
- A8%
- B9%
- C10%
- D11%
How the community answered
(49 responses)- A4% (2)
- B10% (5)
- C71% (35)
- D14% (7)
Topics
#ordinary annuity#implied interest rate#present value#time value of money
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