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it’s an ordinary annuity problem its given are
pv=2000000
Number of years= 25 years
Cash flow or payment = 156000
what is the interest rate? i need the equation of solving.The 25 year annuity factor will be 2,000,000 / 156,000 = 12.821
You could then use the formula for the annuity discount factor that is given to you in the exam to work backwards to find the discount rate.
However this could not be asked in the Paper F2 exam.
(You could if, for example, it was only a 10 year annuity, because the you could look back using the tables, but not for 25 years.)
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