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Catracho Catracho
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Posts: 529
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5 years ago
Hank made payments of $162 per month at the end of each month for 30 years to purchase a piece of property. He promptly sold it for $151,678. What annual interest rate would he need to earn on an ordinary annuity for a comparable rate of return?


Hank would need an annual interest rate of
  %.?
(Round to the nearest hundredth as needed.)

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wrote...
Valued Member
Educator
5 years ago
Again, use the annuity formula:

\(\frac{162\left[(1+i)^{30\times 12}-1\right]}{i}=151678\)

Simplify a little bit:

\(\frac{(1+i)^{30\times 12}-1}{i}=\frac{151678}{162}\)

After solving for \(i\) via whatever method you're comfortable with (I chose graphing), you should get 0.005, and as a percent, that's 0.50% interest.
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