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Vesnalui [34]
3 years ago
11

Assume the total cost of a college education will be $300,000 when your child enters college in 18 years. You presently have $57

,000 to invest. What annual rate of interest must you earn on your investment to cover the cost of your child’s college education?
Business
1 answer:
Levart [38]3 years ago
3 0

Answer:

We require 9.67% return per year to achieve 300,000 in the future

Explanation:

we need to solve for the rate at which a current value of 57,000 dollars will generate 300,000 dollars after 18 years:

Principal \: (1+ r)^{time} = Amount

Principal 57,000.00

time 18.00

Amount 300,000

57000 \: (1+ r)^{18} = 300,000

r=\sqrt[18]{300,000/57,000} -1

r = 0.096653034

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Expected rate of return = 0.073333333 × 100 = 7.3%

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