A recent ad for a Roth IRA includes the statement that if a person invests $500 at the beginning of each month for 35 years, they could have $1,000,000 for retirement. Assuming monthly compounding, what annual interest rate is implied in this statement? A) 6.988%. B) 7.625%. C) 7.411%. D) 7.212%. Ans is C… this is annuity due… so using BGN mode we can get ans directly…but how to solve using END mode… thnx in advance…
as in this question we have 420 payments in annuity due mode, increase 1 payment to get the same interest rate as in beg mode. Logic is quiet simple, the only diff here is the compunding being missed for one payment period in end mode, so we increase the payments i.e n by 1 from 420 to 421 and get the same answer … dont have the calculator with me … but logically should be the same.
I am @ work right now…but I ll try after going home…Thnx for reply…
It gets reasonably close, at 7.4093%.
thanks a lot…
Or you could set the PV to 500 instead of zero.