A. Anthony inherited an annuity worth $3,811.62 from his uncle. The annuity will pay him four equal payments of $1,100 at the end of each year. The annuity fund is offering a return of            .   B. Anthony’s friend, Jack, wants to go to business school. While his father will share some of the expenses, Jack still needs to put in the rest on his own. But Jack has no money saved for it yet. According to his calculations, it will cost him $32,406 to complete the business program, including tuition, cost of living, and other expenses. He has decided to deposit $4,200 at the end of every year in a mutual fund, from which he expects to earn a fixed 10% rate of return. It will take approximately            for Jack to save enough money to go to business school.

Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
ChapterM: Time Value Of Money Module
Section: Chapter Questions
Problem 11E
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9. Implied interest rate and period

Consider the case of the following annuities, and the need to compute either their expected rate of return or duration.
 
A. Anthony inherited an annuity worth $3,811.62 from his uncle. The annuity will pay him four equal payments of $1,100 at the end of each year. The annuity fund is offering a return of            .
 
B. Anthony’s friend, Jack, wants to go to business school. While his father will share some of the expenses, Jack still needs to put in the rest on his own. But Jack has no money saved for it yet. According to his calculations, it will cost him $32,406 to complete the business program, including tuition, cost of living, and other expenses. He has decided to deposit $4,200 at the end of every year in a mutual fund, from which he expects to earn a fixed 10% rate of return. It will take approximately            for Jack to save enough money to go to business school.
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