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

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?

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