Question

Assume the total cost of a university education will be 290000 when your child enters university in 18 years. You currently have 55000 to invest. what annual rate of interest must you earn on your investment to cover the cost of your child's university education?

a) 6.24%

b) 9.68%

c) 8.39%

d) none of the above

Answer 1

Amount Available for investment = 55000

Required amount = 290000

Time = 18 years

Let the requires annual rate of interest be r%

hence ,

Where, A = Total required amount = 290000

P = Amount invested=55000

n = number of period = 18

r= required rate of interest

=>

=>

=>

=> r = 1.0967637433 - 1 = 0.0967637433 or 9.68%

hence correct answer-b) 9.68%