An insurance company is offering to sell an annuity for $20,000 cash. In return the firm will

Question:

An insurance company is offering to sell an annuity for $20,000 cash. In return the firm will guarantee to pay the purchaser 20 annual end-of-year payments, with the first payment amounting to $1100. Subsequent payments will increase at a uniform 10% rate each year (second payment is $1210; third payment is $1331, etc.). What rate of return will the purchaser receive if he buys the annuity?

Annuity
An annuity is a series of equal payment made at equal intervals during a period of time. In other words annuity is a contract between insurer and insurance company in which insurer make a lump-sum payment or a series of payment and, in return,...