are considering an investment in a Third World bank account that pays a nominal annual rate of 18%, compounded monthly.If you invest $5,000 at the beginning of each month, how many months would it take for your account to grow to $250,000? Round fractional months up.
A)23
B)27
C)32
D)38
E)44

Question

Quizplus · Accepted Answer

The future value of an annuity formula is used here: FV = P * [(1 + r)^nt - 1] / r, where P is the monthly investment, r is the monthly interest rate, and nt is the total number of compounding periods. Solving for the number of months (t) when FV = $250,000, P = $5,000, and r = 0.015 (18% annual rate compounded monthly), we find that it takes approximately 38 months.

Are Considering an Investment in a Third World Bank Account