Nicki Johnson, a sophomore mechanical engineering student, receives a call from an insurance agent, who believes that Nicki is an older woman ready to retire from teaching. He talks to her about several annuities that she could buy that would guarantee her an annual fixed income. The annuities are as follows in the popup window:

ANNUITY INITIAL PAYMENT INTO ANNUITY (AT t = 0) AMOUNT OF MONEY RECEIVED PER YEAR DURATION OF ANNUITY (YEARS) A 50,000 6,500 18 B 60,000 8,500 12 C 50,000 8,000 10

If Nicki could earn 11 percent on her money by placing it in a savings account, should she place it instead in any of the annuities? Which ones, if any? Why?

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Part 1

a. What rate of return could Nicki earn on her money if she place it in annuity A with $6,500 payment per year and 18 years duration?

4.314.31%

(Round to two decimal places.)