I plan to invest$2,000 now with the hope of withdrawing$5,500 in 72 months. What monthly rate of return is required?

The question is missing options as shown in the attached.

The correct option is C, the monthly rate of return is 1.41%

Explanation:

The future value formula comes handy in this scenario.

FV=PV(1+r)^n

FV=future value=$5500

PV=present value=$2000

r=unknown

n=number of months =72

5500=2000(1+r)^72

by dividing both sides by 2000 we have

5500/2000=(1+r)^72

divide index by 72

(5500/2000)^1/72=1+r

1.01414 =1+r

r=1.01414-1

r=.01414

r=1.41% approximately

Hence option C as found in the image attached is the correct option

1.41%

Explanation:

Principal Amount = $2,000

Withdrawal Amount = $5,500

Number of month = 72 month

Monthly rate of return = ?

Use Following formula to calculate rate of return

A =P x ( 1 + r )^n

$5,500 = $2,000 x ( 1 + r )^72

$5,500 / $2,000 = ( 1 + r )^72

2.75 = ( 1 + r )^72

=

1.01415 = 1 + r

r = 1.01415 -1

r = 0.0141

r = 0.0141

r = 1.41%

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