Hank made payments of $187 per month at the end of each month for 30 years to purchase a piece of property. He promptly sold it for $172,787. What annual interest rate would he need to earn on an ordinary annuity for a comparable rate of return?

Question

Wags

Mathematics

12 September, 06:56

Hank made payments of $187 per month at the end of each month for 30 years to purchase a piece of property. He promptly sold it for $172,787. What annual interest rate would he need to earn on an ordinary annuity for a comparable rate of return?

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Answers (1)

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Bruno · Answer 1

We are given with

A = 187 per month

n = 30 years

F = 172787

What is asked is i

The formula is

A = Fi / (1 + i) ^n

Substituting

187 = 172787 i (1 + i) ^ (30x12)

Solve for i and convert to effective annual interest rate