Question

Assume the total cost of a college education will be $200,000 when your child enters college in 16 years. You presently have $67,000 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

you must earn an annual rate of interest of 7.07 %

Step-by-step explanation:

The annual rate of interest, r on the investment is calculated as follows :

Pv = - $67,000

Pmt = $ 0

P/yr = 1

N = 16

Fv = $200,000

r = ?

Using a Financial Calculator, annual rate of interest, r on the investment is 7.07 % .