What Rate of Return (Compounded Monthly)will You Need,to Reach a Lump-Sum

question 53

Multiple Choice

What rate of return (compounded monthly) will you need,to reach a lump-sum total of $500000 in 20 years if you contribute $500 per month?

• A)12.1 percent
• B)8)9 percent
• C)13.2 percent
• D)7)31 percent

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Definitions:

Compounded Monthly

The process of adding interest to the principal sum of a loan or deposit, or in other words, interest on interest, with this process happening every month.

Compounded Monthly

A method of calculating interest where the accrued interest is added to the principal each month before the next interest calculation.

Compounded Quarterly

The technique of determining interest by taking into account the original principal sum and the interest that has accrued in earlier cycles, with this process being carried out every three months.

Compounded Semi-Annually

Interest on an investment is calculated and added to the principal every six months, with future interest then calculated on the new total.