Internal Rate of Return

Is a big investment worth the money? Well, what rate of return do you expect to realize from it?

Imagine that someone offers you an annuity of $5,000 for 5 years. How much should you pay for it?

The rate of return is similar in concept to the interest rate. You are putting out money for something and you want to know what you are going to get back out of it.

Here’s a test case: what is your rate of return for your social security? Hint: It’s lower than you think.