A person is considering entering into an agreement with an investment company to
ID: 2506321 • Letter: A
Question
A person is considering entering into an agreement with an investment company to deposit $750 into a special account a the end of each year of 15 years. At the end of the period, the person would be able to withdraw a lump sum of $45,000. At what rate would the person earn interest, if the interest was compounded annually? A person is considering entering into an agreement with an investment company to deposit $750 into a special account a the end of each year of 15 years. At the end of the period, the person would be able to withdraw a lump sum of $45,000. At what rate would the person earn interest, if the interest was compounded annually?Explanation / Answer
according to compound interest
Total = P*(1+R)^n
n= period
R= rate
P= principal
45000 = 750*(1+R)^15
solving we get R = 0.31384 or rate = 31.38%
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