Jamal wants to invest $150 every month for 10 years. At the end of that time he would like to have $25000. At what annual interest rate, compounded monthly, does Jamal need to invest to reach...
Jamal wants to invest $150 every month for 10 years. At the end of that time he would like to have $25000.
At what annual interest rate, compounded monthly, does Jamal need to invest to reach his goal?
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This question is related to the future value of growing annuity. It is given by;
`FV = A((1+i)^n-1)/i`
FV = Future value of the time period n
A = Initial payment at n=1
i = compound rate
n = number of payment period considered
(The entire section contains 107 words.)
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This question is related to the future value of growing annuity. It is given by;
FV = Future value of the time period n
A = Initial payment at n=1
i = compound rate
n = number of payment period considered
For the question;
FV = $25000
A = $150
n = 120 months
For ease of calculation we can set
Then ;
No using a scientific calculator you can solve this.
It will give r as;
So the monthly interest rate
Annual interest rate
So the annual interest rate would be 6.31%.
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