Question

You have been saving $1,000 annually for the past 15 years and now you have $50,000,...

You have been saving $1,000 annually for the past 15 years and now you have $50,000, What is your annual rate of return?

A.

10.25%
B.

14.39%
C.

15.60%
D.

11.33%
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Homework Answers

Answer #1

Information provided:

Future value= $50,000

Annual saving= $1,000

Time= 15 years

The question is solved by calculating the yield to maturity.

The yield to maturity is calculated by entering the below in a financial calculator:

FV= 50,000

PMT= -1,000

N= 15

Press the CPT key and I/Y to compute the yield to maturity.

The value obtained is 15.60.

Therefore, the annual rate of return is 15.60%.

Hence, the answer is option c.

In case of any query, kindly comment on the solution.

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