Investments of $200 at the beginning of every month have accumulated to $405,515 after 30 years

Finance Apr 25, 2021

Investments of $200 at the beginning of every month have accumulated to $405,515 after 30 years. Expressed as a monthly compounded nominal annual rate, what return have these investments provided? (Answer in percentage)

Expert Solution

Computation of Monthly Compounded Nominal Annual Rate using Rate Function in Excel:

=rate(nper,pmt,-pv,fv,type)*12

Here,

Rate = Monthly Compounded Nominal Annual Rate = ?

Nper = 30 years*12 months = 360 months

PMT = $200

PV = 0

FV = $405,515

Type = 1 (at the beginning)

Substituting the values in formula:

=rate(360,200,0,-405515,1)*12

Rate or Monthly Compounded Nominal Annual Rate = 9.45%

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