What annually compounded rate of return must Thiva earn in her TFSA account in order for month end contributions of $950 to accumulate $1 million after 25 years?

Question

Quizplus · Accepted Answer

To solve this, we use the future value of a series formula: $FV = P \times \frac{(1 + r)^n - 1}{r}$, where FV is the future value ($1 million), P is the monthly contribution ($950), r is the monthly interest rate (annual rate / 12), and n is the total number of contributions (25 years * 12 months). Rearranging to solve for r and substituting the given values, we find that the annual rate that matches the criteria is approximately 8.97%.

What Annually Compounded Rate of Return Must Thiva Earn in Her