Asked by Beniah Greene on May 11, 2024
Verified
What compounded rate of return will allow investments of $800 at the end of every six months to accumulate to $24,000 after 10 years?
A) 14.876%
B) 8.062%
C) 8.143%
D) 8.309%
E) 15.286%
Compounded Rate
The rate at which interest is calculated on the initial principal and the accumulated interest of previous periods.
- Ascertain the essential interest rate to realize a particular monetary objective in a designated timeframe.
- Evaluate the effects of changing interest rates and the term of investments on their growth.
Verified Answer
MD
Morgan DownesMay 16, 2024
Final Answer :
B
Explanation :
The correct answer is found using the formula for the future value of an annuity. Given the semi-annual investments ($800), the total time period (10 years or 20 periods), and the future value ($24,000), we solve for the interest rate. The closest rate that matches these conditions is 8.062%.
Learning Objectives
- Ascertain the essential interest rate to realize a particular monetary objective in a designated timeframe.
- Evaluate the effects of changing interest rates and the term of investments on their growth.