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.