Every month for the past eight years you have invested 50 in

Every month for the past eight years you have invested $50 in a mutual fund. Today, your account is valued at $6,419. What rate of return have you been earning on this investment? PLEASE INCLUDE HOW TO ENTER ON FINANCIAL CALCULATOR. I need to be able to know how to enter long-term cash flows

Solution

$6,419 is the FV of the $50 invested for 8*12 = 96 months. Therefore, 6419 = 50*FVIFA(r,96), where r = the monthly interest rate. r = 6419/50 = 128.38 FVIFA for r = 0.58% = 127.9784 for r = 0.59 = 128.6411 The exact value of r can be found out by simple interpolation as below: r = 0.58+0.01*(128.38-127.9784)/(128.6411-127.9784) = 0.5861 Annual rate = r*12 = 7.03 This is an annuity: Enter FV is $6419, PMT = $50, n = 96. Then seek interest rate. The interest rate so obtained has to be multiplied by 12 to get the annual rate.