Question

In: Accounting

Elga plans to invest $175 every month by purchasing units of a diversified equity mutual fund....

Elga plans to invest $175 every month by purchasing units of a diversified equity mutual fund.

          

If the fund generates an overall rate of return of 6% compounded monthly, what will her holdings be worth after 8.25 years? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

      

Solutions

Expert Solution

Every month 175 dollars SBI invested @ 6% compounded monthly over the period of 8.25 years.

8.25 years = 99 months.

In this question I have assumed that the first investment is made at the beginning of the month therefore interest for that particular month will also be calculated.

Also in the given below pictures I have calculated the holding as per 6% monthly as well as 6% annually rate of return because in the question it is not clearly given whether the 6% rate is monthly or annually.

So answer as per 6% interest rate is equal to $986,539.4103 and 0.5 % interest rate is equal to $ 22,458.397

For your reference I have attached the formula file also.


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