Question

Claire estimates that it will cost $455,000 to send her newborn twin sons to a private college in Hawaii in 18 years. She currently has $45,000 to deposit in an account. What simple interest rate would she need so that her money grows into $455,000 in 18 years? (Round to the nearest hundredth percent)

Answer 1

Claire would need a simple interest rate of 56.25% to grow her money into $455,000 in 18 years.

Step-by-step explanation:

To find the simple interest rate that Claire would need, we can use the formula:

Simple Interest = Principal × Rate × Time

We know that the Principal is $45,000, the future amount is $455,000, and the Time is 18 years. Let's substitute these values into the formula:

$455,000 = $45,000 × Rate × 18

We can solve for Rate by dividing both sides of the equation by ($45,000 × 18):

Rate = $455,000 / ($45,000 × 18)

Rate = 0.5625

To express the rate as a percentage, we can multiply it by 100:

Rate = 0.5625 × 100 = 56.25%

Therefore, Claire would need a simple interest rate of 56.25% to grow her money into $455,000 in 18 years.