An engineer deposits $540 each month into a retirement account. After 30 years, the balance in the account is $1.7 million. Determine the effective annual rate of return for this account. Express your answer in % (not decimal) to the nearest 0.1%.

Question

Brielle Dyer

Business

17 October, 03:51

An engineer deposits $540 each month into a retirement account. After 30 years, the balance in the account is $1.7 million. Determine the effective annual rate of return for this account. Express your answer in % (not decimal) to the nearest 0.1%.

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Andrea · Answer 1

Each month 540 there are 12 months in a year

540*12 = 6480 yearly

n = 30 years

FV = $1700000

FV = pmt * [ (1+r) ^n-1/r) ]

1700000 = 6480[ (1+r) ^30-1/r]

1700000/6480 = 6480[ (1+r) ^30-1/r]/6480

262.35 = (1+r) ^30-1/r

262.35r = (1+r) ^30-1

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