Suppose you invest $500 in a stock mutual fund at the end of each month. When you retire at the end of your 35-year career, your account is worth $4,000,000. What annual rate of return did you earn over the 35 years

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Business

Norah Mcconnell

6 January, 21:36

Suppose you invest $500 in a stock mutual fund at the end of each month. When you retire at the end of your 35-year career, your account is worth $4,000,000. What annual rate of return did you earn over the 35 years

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Answers (1)

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Matthew Jennings · Answer 1

12.81%

Explanation:

PMT (The amoun you invest each month) is $500

n = 35 years = 35 x 12 = 420 months

Future value (FV) of your account in 35 years is $4,000,000

Present value (PV) = 0

i/r = ?

Inputting these values into financial calculator, we get:

i/r = 1.07%/month

--> Annual rate of return is 1.07% x 12 = 12.81%