You are convinced you can save $300 per month for the next 10 years. About what...
You are convinced you can save $300 per month for the next 10 years. About what kind of APR do you need to get in order to reach a balance of $45,000?
Group of answer choices
about 4.35%
about 3.63%
about 4.87%
Homework Answers
Solution:
Monthly contributions: US $ 300 per month
Annual Contributions: US $ 300 * 12 = US $ 3,600
No of years: 10 years
Future Value of the Investment: US $ 45,000
Hence,
Applying the formula of Future Value (FV), we can calculate the annualised percentage return (APR)
FV = Contribuions * [ ((1+APR%)n - 1)/ APR% ] * (1+APR%)
$ 45,000 = $ 3,600 * [ ((1+APR%)10 - 1) / APR%] * (1+APR%)
Solving the equation,
APR% = 4.87%
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