Isabel believes that she can accumulate $5,000,000 over 35 years by investing $4,500 at the beginning of every quarter year. What semiannually compounded nominal rate would she need to earn?

Question

Quizplus · Accepted Answer

To find the nominal rate compounded semiannually, we use the future value of an annuity formula. Solving for the rate that makes the future value $5,000,000 with quarterly payments of $4,500 over 35 years, we find that the nominal rate is approximately 9.619%.

Isabel Believes That She Can Accumulate $5,000,000 Over 35 Years