A mutual fund has been advertising that, had you deposited $250 per month in the fund for the last 10 years, you would now have accumulated $85,000. Assuming that these deposits were made at the beginning of each month for a period of 120 months, calculate the effective annual return fund investors got.

Hint: Set up the spreadsheet below and then use Goal Seek.

The effective annual return can then be calculated in one of two ways:
(1 + monthly return)12 − 1: This is the compound annual return, which is preferable, since it makes allowance for the reinvestment of each month’s earnings.
12 * monthly return: This method is often used by banks.

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A B 250 120 1 Monthly payment 2 Number of months 3 4 Effective monthly return? 5 Accumulation