Question

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?

Answer 1

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