Question

Maurice estimates that it will cost $175,000 to send his newborn daughter to a private college in 18 years. He currently has $65,000 to deposit in an account. What simple interest rate would he need so that $65,000 grows into $175,000 in 18 years? Round to the nearest percent.

Answer 1

Maurice would need a simple interest rate of approximately 17.09%.

Step-by-step explanation:

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

Interest = Principal × Rate × Time

We know the principal amount is $65,000, the future amount is $175,000, and the time is 18 years. Let's solve for the rate:

175,000 = 65,000 × Rate × 18

Simplifying the equation, we get:

Rate = 175,000 / (65,000 × 18)

Rate = 0.1709 or 17.09%

Therefore, Maurice would need a simple interest rate of approximately 17.09% to grow his $65,000 into $175,000 in 18 years.