Question

Consider the case of the following annuities, and the need to compute either their expected rate of return or duration. Joshua needed money for some unexpected expenses, so he borrowed $6,884.25 from a friend and agreed to repay the loan in six equal installments of $1,400 at the end of each year. The agreement is offering an implied interest rate of . Joshua’s friend, Willie, has hired a financial planner for advice on retirement. Considering Willie’s current expenses and expected future lifestyle changes, the financial planner has stated that once Willie crosses a threshold of $9,221,104 in savings, he will have enough money for retirement. Willie has nothing saved for his retirement yet, so he plans to start depositing $85,000 in a retirement fund at a fixed rate of 6.00% at the end of each year. It will take years for Willie to reach his retirement goal.

Answer 1