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wel
1 month ago
9

An insurance firm agrees to pay you $3,310 at the end of 20 years if you pay premiums of $100 per year at the end of each year f

or 20 years. Find the internal rate of return to the nearest whole percentage point.
Business
1 answer:
Mariulka [3.4K]1 month ago
3 0

Answer:

6.43%

Explanation:

The insurance company will calculate the internal rate of return utilizing the method detailed below:

Cash flows      Year involved      Present [email protected]%  Present [email protected]%          

($100)                 1-20                      ($851)                            ($1,487.75)                      

$3,310                 20                        $492                             $1,832.67

                                                        ($359)                           $344.92

IRR=A%+ (a/a-b)*(B%-A%)

A%=10%  a= ($359) B%=3%  b=$344.92  

IRR=10%+(-$359/-$359-$344.92)*(3%-10%)

     =6.43%

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