You just paid $750,000 for an annuity that will pay you and your heirs $45,000 a year forever. What rate of return are you earning on this policy?

Name: You just paid $750,000 for an annuity that will pay you and your heirs $45,000 a year forever. What rate of return are you earning on this policy?
Brand: Quizplus
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Question

Quizplus · Accepted Answer

The rate of return on a perpetuity is calculated by dividing the annual payment by the purchase price. Here, $45,000 / $750,000 = 0.06, or 6.00 percent.

You Just Paid $750,000 for an Annuity That Will Pay