Hank made payments of 224 per month at the end of each month

Hank made payments of $224 per month at the end of each month for 30 years to purchase a piece of property. He promply sold it for $186,771. What annual interest rate would he need to earn on an ordinary annuity for a comparable rate of return?(round to the nearest hundredth as needed)

Solution

P = r*FV/[ (1+r)^n -1]

P = Payment = $224 ; r = rate of interest , n = 12*30 = 360

FV (Future value ) = $186771

Find r by plugging values:

224[ (1+r)^360-1]/r = 186771

solve r for interest rate

(1+r)^360 = 1+ 0.0012r