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Q 3 . Suppose your parents are getting ready to retire and decide to convert some of their retirement portfolio, which is invested in the

3 .

Suppose your parents are getting ready to retire and decide to convert some of their retirement portfolio, which is invested in the stock market, into an annuity that guarantees them affected annual income. Their insurance agent asks for $

425, 000

for an annuity that guarantees to pay them $

65, 000

a year for

12

years. What is the rate of return on the annuity?

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