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27 October, 20:16

Suppose that you plan to invest $1200 at the end of each of the next 9 years and you want to have accumulated $15,600 at the end of this period. What rate of return would you need to achieve? (Hint: this is what I called an A=BxC problem in which you know A and B.)

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  1. 27 October, 21:47
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    The rate of return is 8.96%

    Explanation:

    The rate of return required here can be computed using excel rate formula, which is stated thus:

    =rate (nper,-pmt, pv, fv)

    nper is the duration of investment which is 9 years

    pmt is the yearly invested sum of $1,200

    pv is the present worth of total invested sum which is unknown and taken as zero

    fv is the future accumulated investment amount of $15,600

    =rate (9,-1200,0,15600) = 8.96%
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