Suppose that you plan to invest $1200 at the end of each of the next 9 years and you want to have accumulated $15,600 at the end of this period. What rate of return would you need to achieve? (Hint: this is what I called an A=BxC problem in which you know A and B.)

Question

Soren Curry

Business

7 May, 12:56

Suppose that you plan to invest $1200 at the end of each of the next 9 years and you want to have accumulated $15,600 at the end of this period. What rate of return would you need to achieve? (Hint: this is what I called an A=BxC problem in which you know A and B.)

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Answers (1)

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Simeon · Answer 1

The rate of return is 8.96%

Explanation:

The rate of return required here can be computed using excel rate formula, which is stated thus:

=rate (nper,-pmt, pv, fv)

nper is the duration of investment which is 9 years

pmt is the yearly invested sum of $1,200

pv is the present worth of total invested sum which is unknown and taken as zero

fv is the future accumulated investment amount of $15,600

=rate (9,-1200,0,15600) = 8.96%