With month payment of $580 into a savings account,in 5 years,Allen finally accumulates $80,000 for his dream trip to travel around the world.What could be the effective rate of interest that Allen's savings account enjoys in the 5-year term?
A) 18.37%
B) 20.84%
C) 35.11%
D) 10.75%

Question

Quizplus · Accepted Answer

Let the effective rate of interest be r. The future value of Allen's savings account can be calculated using the formula:

Future value = (monthly payment * (((1+r/12)^(12*5))-1)/(r/12))

Using the given values, we get:

80,000 = (580 * (((1+r/12)^(12*5))-1)/(r/12))

Solving this equation gives us:

r = 35.11%

Therefore, the effective rate of interest that Allen's savings account enjoys in the 5-year term is 35.11%. Option C is the correct choice.

With Month Payment of $580 into a Savings Account,in 5