question archive If TFSA contributions of $10,000 at the end of every year are projected to generate a plan worth $1,000,000 in 25 years, what effective rate of return was assumed in the forecast? -the book says 10

If TFSA contributions of $10,000 at the end of every year are projected to generate a plan worth $1,000,000 in 25 years, what effective rate of return was assumed in the forecast? -the book says 10

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If TFSA contributions of $10,000 at the end of every year are projected to generate a plan worth $1,000,000 in 25 years, what effective rate of return was assumed in the forecast?

-the book says 10.11% compounded annually-

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Future value = A(1+r)n

$1,000,000 = $10,000(1+r)25

$100 = (1+r)25

 

 

Step-by-step explanation

Using hit and trial method, we get

$100 = (1+20.23%)25

 

Thus, effective rate of return was assumed in the forecast is 20.23%

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