Question

Assume the total cost of a college education will be $200,000 when your child enters college in 16 years. You presently have $55,000 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

8.4%

Explanation:

let x = interest rate

55,000(1 + x)^16 = 200,000

divide both sides by 55,000

(1 + x)^16 = 3.636

find the invese of 16

1 + x = 1.084

x = 0.084

x = 8.4