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Math Help - Rate of return of an annuity

  1. #1
    Junior Member
    Joined
    Feb 2009
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    44

    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.
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  2. #2
    Newbie
    Joined
    Mar 2009
    Posts
    10
    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.
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