# Rate of return of an annuity

• March 23rd 2010, 07:34 AM
thehollow89
Rate of return of an annuity
Hi, I am unsure what the formula and process of finding the rate of return for an annuity is. Here is the specific question:

Ed's company is offering him $20,000 to take early retirement. Ed is worrying about payiing$400 at the start of each month for his benefits. Calculate the rate of return compounded quarterly that Ed needs to make on his \$20,000 in order to pay the benefits for 5 years.
• March 24th 2010, 12:50 AM
econstudent
$20000=400\, \left( 1- \left( 1+r \right) ^{-20} \right) {r}^{-1}$

That's the formula. You can use Excel or another financial tool to solve this.