You have deposited $25,165 in a special account that has a guaranteed rate of return. If you withdraw $5,000 at the end of each year for 7 years, you will completely exhaust the balance in the account. The guaranteed rate of return is closest to: (Ignore income taxes.)Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. (Round your intermediate calculations to 3 decimal places.)
A) 9%
B) 10%
C) 8%
D) 11%

Question

Quizplus · Accepted Answer

The guaranteed rate of return is closest to 9% because the present value of the withdrawals, discounted at 9%, is equal to the initial deposit of $25,165.

You Have Deposited $25,165 in a Special Account That Has