Question

To save for​ retirement, Karla Harby put ​$800 each month into an ordinary annuity for 11 years. Interest was compounded monthly. At the end of the 11 ​years, the annuity was worth ​$139,839. What annual interest rate did she​ receive?

Answer 1

Karla Harby put $800 each month into an ordinary annuity for 11 years. Interest was compounded monthly. At the end of the 11 years, the annuity was worth $139,839. What did she receive? From the given information, the amount of annuity is A = $139,839 Principle Amount: $800 each month into an ] p=$800(12x11) Lordinary annuity for 11 years. = $105,600 Time in years t=11 Number of times interest compounded for a year is n=12 Calculate annual interest rate as follows: (1211) 139839 – 105600(1+) (1.324)* =1+ 1+ 12 =1.0021 r+12 = 12.025541 r=0.026 r = 2.6%