Question

Suppose you will invest $100 per month at the beginning of the month for 40 years with interest rate

of 6.25% per year. Find the total amount of capital at the end of your investment. What percentage is

your total return?

Answer 1

future value = 232369.1361

return % = 384.10 %

Step-by-step explanation:

given data

principal = $100 per month

time = 40 year = 480 months

rate = 6.25 % yearly = 0.0625 yearly = 0.005208 monthly

to find out

total amount of capital at the end of your investment and percentage is your total return

solution

so here future value formula is

future value = P
`((1+r)^(t-1))/(r) * (1+r)` ..........1

here r is rate and t is time and P is principal

so put all value

future value = 100
`((1+0.005208)^(480-1))/(0.005208) * (1+0.005208)`

future value = 232369.1361

so

Total capital at the end of investment-Total principle invested over the years

232369.1361 - 100 ( 12 × 40 )

184369.1361

so

Return % =
`(184369.1361)/(48000)` × 100

return % = 384.10 %