Question

Nelson decides to invest $1,000,000 in a period annuity that earns 4.8% APR

Answer 1

Answer:

21years

Step-by-step explanation:

Amount invested by Nelson = $1,000,000

Interest rate per month = 4.8%

Simple Interest = Principal * Rate * Time/100

simple Interest = $1,000,000 * 4.8 *(1/12)/100

simple Interest = $1,000,000 * 4.8/1200

simple interest = $4,000/ month

Simple interest for one year = $4,000*12 = $48,000

In order to determine the number of years it will take Nelson to earn back his initial investment, we will divide its initial investment by the interest earned on the investment yearly as shown;

amount of years =  $1,000,000/ $48,000

Amount of years = 20.8years ≈ 21years