Bill is considering investing $450 at the end of every month in a fixed income instrument. He will be receiving $27,000 at the end of 4 years. If the interest is compounded monthly, what is the annual rate of return earned on the investment?
A) 11.04%
B) 22.25%
C) 15.07%
D) 18.30%
E) 13.58%

Question

Quizplus · Accepted Answer

The future value of an annuity formula is used to calculate the annual rate of return. Solving for the interest rate that equates the future value of the annuity ($27,000) to the monthly investment ($450) over 48 months (4 years) results in an annual rate of approximately 11.04%.

Bill Is Considering Investing $450 at the End of Every