Question

You have been investing $300 a month for the last 8 years. Today, your investment account is worth $43,262. What is your average rate of return on your investments?

Answer 1

Answer:

Having invested $ 300 per month for the past 8 years, the total accumulated investment amount would be $ 28,800 (8 x 12 x 300). Now, having a total amount of $ 43,262, we find an increase of $ 14,462, which corresponds to the interest accumulated during said period. To know the percentage of the increase, we must perform a cross multiplication:

28,800 = 100

14,462 = X

(14,462 x 100) / 28,800 = X

1,446,200 / 28,800 = X

50.21 = X

As we can see, the investment had an increase of 50.21% during these 8 years. Now, the average increase in investment arises from the division of the total percentage of increase by the number of years. So, given that 50.21 / 8 = 6.27, the average annual return rate of this investment is 6.27%.