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    Rate of Return of an Annuity: Your Uncle's Offer

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    Assume that you own an annuity that will pay you $15,000 per year for 12 years, with the first payment being made today. You need money today to start a new business, and your uncle offers to give you $120,000 for the annuity. If you sell it, what rate of return would your uncle earn on his investment?

    A. 6.85 %
    B. 7.21%
    C. 7.59 %
    D. 7.99 %
    E. 8.41 %.

    Please show the calculation.

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    Solution Summary

    Your tutorial is attached in Excel showing your uncle's initial outlay and the returns he will earn.