All County Insurance, Inc

Multiple Choice

All County Insurance, Inc. promises to pay Ted $1 million on his 65^thbirthday in return for a one-time payment of $75,000 today. (Ted just turned 25) At what rate of interest would Ted be indifferent between accepting the company's offer and investing the premium on his own?

A) 2.4%
B) 5.5%
C) 6.1%
D) 6.7%
E) 7.2%