Question

Say a bank has a scheme where you can deposit $5,000 a year starting on the...

Say a bank has a scheme where you can deposit $5,000 a year starting on the day your granddaughter is born till the day she turns 21 years old (22 deposits). For doing this the bank is ready to pay your grand daughter $3,000 on her 22nd birthday, and increase the amount by $2,000 every year till she turns 60. What rate of return per year compounded yearly did the bank pay for the deposits?

Around 2%

Around 5%

Around 8%

Around 11%

please show work in excel

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Homework Answers

Answer #1
time Cashflow
0 5000
1 5000
2 5000
3 5000
4 5000
5 5000
6 5000
7 5000
8 5000
9 5000
10 5000
11 5000
12 5000
13 5000
14 5000
15 5000
16 5000
17 5000
18 5000
19 5000
20 5000
21 5000
22 -3000
23 -5000
24 -7000
25 -9000
26 -11000
27 -13000
28 -15000
29 -17000
30 -19000
31 -21000
32 -23000
33 -25000
34 -27000
35 -29000
36 -31000
37 -33000
38 -35000
39 -37000
40 -39000
41 -41000
42 -43000
43 -45000
44 -47000
45 -49000
46 -51000
47 -53000
48 -55000
49 -57000
50 -59000
51 -61000
52 -63000
53 -65000
54 -67000
55 -69000
56 -71000
57 -73000
58 -75000
59 -77000
60 -79000
IRR 8%

The answer is around 8%

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