All County Insurance, Inc. promises to pay Ted $1 million on his 65thbirthday in return for a one-time payment of $75,000 today. (Ted just turned 25) At what rate of interest would Ted be indifferent between accepting the company's offer and investing the premium on his own?
A) 2.4%
B) 5.5%
C) 6.1%
D) 6.7%
E) 7.2%
Correct Answer:
Verified
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