Question

To save for retirement, Karla Harby put $625 each month into an ordinary annuity for 12 years. Interest was compounded monthly. At the end of the 12 years, the annuity was worth $128,965. What annual interest rate did she receive?

Answer #1

We know that compound interest formula as,

Where A : Amount

P : Principle

r : interest rate

n : number of times interest compounded per year

t : time in years

So here given quantities are,

A = 128965

P = 625

n = 12 (months in year)

t = 12 (years)

So we get by substituting these values in above formula,

this implies that

So r = 0.4534

So she received 45.34 % annual interest.

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