Ask Question
24 March, 08:25

Assume the total cost of a college education will be $325,000 when your child enters college in 16 years. you presently have $40,000 to invest and do not plan to invest anything further. what annual rate of interest must you earn on your investment to cover the entire cost of your child's college education?

+2
Answers (1)
  1. 24 March, 08:39
    0
    Future value FV = $325,000

    Investment I = $40,000

    Number of years n = 16

    Annual rate = r

    We have the equation FV = I (1 + r) ^n = > 325000 = 40000 (1 + r) ^16

    (1 + r) ^16 = 325 / 40 = > 1 + r = (325 / 40) ^ (1/16) = > 1 + r = 1.1398

    Rate of Interest r = 1.1398 - 1 = 0.1398 that is 13.98%

    Annual rate of Interest r = 13.98%
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Assume the total cost of a college education will be $325,000 when your child enters college in 16 years. you presently have $40,000 to ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers