We plan to have $1,500,000 in 35 years. We will make quarterly deposits of $1,000 at the end of every 3 months for 25 years and then allow the money to accumulate, without more deposits, at 8% compounded annually for the last 10 years. What compounded annual nominal rate of return will we have to earn over the 25 years that we will be making the quarterly deposits?

A) 13.482%
B) 12.774%
C) 12.641%
D) 11.722%
E) 10.939%

To solve this problem, we need to break it down into two main parts: the accumulation phase during the 25 years of quarterly deposits and the growth phase during the last 10 years without additional deposits.1. **Accumulation Phase (25 years with quarterly deposits):** We need to find the future value (FV) of the quarterly deposits after 25 years. However, since the question asks for the nominal annual rate needed during this period, we first need to calculate the future value at the end of the 25 years using the given 8% annual rate for the last 10 years.2. **Growth Phase (10 years without deposits):** The $1,500,000 future value needs to be discounted back 10 years using the 8% annual growth rate to find what the account balance should be at the end of the 25-year deposit period.First, calculate the present value (PV) of $1,500,000 at the end of 35 years, discounted back to the end of the 25-year period using the 8% annual rate for 10 years. $$PV=\frac{FV}{(1+r{)}^n}$$$$PV=\frac{1,500,000}{(1+0.08{)}^{10}}$$$$PV=\frac{1,500,000}{(1.08{)}^{10}}$$$$PV=\frac{1,500,000}{2.15892}$$$$PV\approx 694,444.89$$ This means at the end of the 25 years, before the last 10 years of growth, the account needs to have approximately $694,444.89 to grow to $1,500,000 at an 8% annual rate over the next 10 years.Next, we need to find the nominal annual rate that would allow $1,000 quarterly deposits to grow to approximately $694,444.89 over 25 years.Using the future value of an annuity formula: $$FV=P\times \left(\frac{(1+r{)}^n-1}{r}\right)$$ Where:- $FV$ is the future value of the annuity, which we calculated as approximately $694,444.89.- $P$ is the payment amount per period, which is $1,000.- $r$ is the quarterly interest rate (annual rate divided by 4).- $n$ is the total number of payments (25 years * 4 quarters/year = 100 quarters).We need to solve for the annual rate ( $r$ ) that makes this equation true. This typically requires financial calculator or spreadsheet software, as it involves solving for the rate in a compound interest formula, which cannot be algebraically rearranged easily to solve for $r$ directly.Given the options provided and knowing the process to solve it, the correct nominal annual rate of return over the 25 years of making quarterly deposits that matches the conditions provided is approximately 12.774%. This rate, when applied to the formula for future value of an annuity, would yield the necessary future value at the end of 25 years to grow to $1,500,000 in the next 10 years at an 8% annual rate.