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7 April, 14:31

Assume the total cost of a college education will be $245,000 when your child enters college in 15 years. You presently have $108,000 to invest for this purpose. What rate of interest must you earn to cover the cost of your child's college education

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  1. 7 April, 17:52
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    8.45%

    Explanation:

    The formula to calculate the rate of interest is:

    r = (1/t) (A/P - 1), where

    r = Rate of interest

    t = Time period: 15 years

    A = Accrued amount: 245,000

    P = Principal amount: 108,000

    Now, you can replace the values to find the rate of interest:

    r = (1/15) ((245,000/108,000) - 1)

    r = (0.0667) (2.2685-1)

    r = (0.0667) (1.268)

    r = 0.0845 → 8.45%

    According to this, the answer is that the rate of interst that you must earn to cover the cost of you child's college education is 8.45%.
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