$20,000 can be invested under two options:

Option 1 : Deposit $20,000 into a fund earning an annual effective rate of i; or

Option 2: Purchase an annuity-immediate with 12 level annual payments at an effective rate of 6%

The payments under options 2 are deposited into a fund earning an annual effective rate of 4% . Both options produce the same accumulated value at the end of 12 years. Calculate i .

HW 4 $ 20000 can be invested under two options: Option 1 $20,000 Deposit the into a fund caring an annual effec- tive rate of i; or Option 2 Purchase an annuity-immediate with level annual payments at an annual effective rate of 6% The payments under Option 2 are deposited into a fund earning an annual effective rate of Both options produce the same accumulated value at the end of years. Calculate i. 12