Question

oz wants to build a house in ten years. he estimates that the total cost will be $150,000. if he can put aside $10,000 at the end of each year, what rate of return must he earn in order to have the amount needed? group of answer choices between 4% and 6% between 6% and 8% above 10% between 8% and 10%

Answer 1

To accumulate $150,000 in ten years, Freda must earn a rate of return of approximately 6.1%. The correct option is between 6% and 8%.

To determine the rate of return Freda must earn to accumulate $150,000 in ten years, we can use the compound interest formula:

Future Value = Present Value * (1 + r)^n

Where: Future Value = $150,000, Present Value = $10,000, n = 10 years

Solving for r:

$150,000 = $10,000 * (1 + r)¹⁰

By rearranging the equation and solving for r, we find that Freda must earn a rate of return of approximately 6.1% to accumulate $150,000 in ten years.