Question

Assume the total cost of a university education will be 290000 when your child enters university...

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

Homework Answers

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%

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Assume the total cost of a university education will be $70,000 when your child enters university...
Assume the total cost of a university education will be $70,000 when your child enters university in 6 years. You presently have $40,000 to invest. What annual rate of interest (APR) must you earn, if the interest is compounded semi-annually? Enter your answer as a percentage. Do not include the percentage sign in your answer.
Q1. Calculating Interest Rates Assume the total cost of a college education will be $345,000 when...
Q1. Calculating Interest Rates Assume the total cost of a college education will be $345,000 when your child enters college in 18 years. You presently have $73,000 to invest. What annual rate of interest must you earn on your investment to cover the cost of your child’s college education? Q2. Calculating the Number of Periods At 6.1 percent interest, how long does it take to double your money? To quadruple it?
question2 Assume the total cost of a university education will be $50 000 when your child...
question2 Assume the total cost of a university education will be $50 000 when your child enters university in 10 years. You presently have $1 000 to invest. What annual rate of interest (%, to 2 decimals) must you earn on your investment to cover the cost of your child’s university education? Question 3 You expect to receive $40 000 at graduation in four years. You plan on investing it at 5% until you have $100 000. How long (years...
17. You want to invest an amount of money today and receive back ten times that...
17. You want to invest an amount of money today and receive back ten times that amount in the future. You expect to earn 12.2 percent interest. Approximately how long must you wait for your investment to grow ten times in value? Group of answer choices 6 years 9 years 12 years 15 years 20 years 18. You have $1,100 today and want to triple your money in 5 years. What interest rate must you earn if the interest is...
You have just made a $6,200 contribution to your individual retirement account. Assume you earn a...
You have just made a $6,200 contribution to your individual retirement account. Assume you earn a rate of return of 9.50 percent compounded annually and make no additional contributions. How much more will your account be worth when you retire in 35 years than it would be if you waited another 10 years before making this contribution? Group of answer choices $88,610.66 $59,143.85 $148,554.52 $72,171.92 Assume the total cost of a college education will be $170,000 when your baby enters...
A couple wishes to establish a college fund at a bank for their seven-years-old child. The...
A couple wishes to establish a college fund at a bank for their seven-years-old child. The college fund will earn 10% interest compounded monthly. Assuming that the child enters university at age 18, the family estimates that amount of SR18,000 per year, in terms of today's dollars will be required to support the child's university expenses for four years. College expenses are estimated to increase at an annual rate of 9%. Determine the equal monthly deposit amounts the family must...
Your new born child will be starting college in 18 years. You expect your child's college...
Your new born child will be starting college in 18 years. You expect your child's college education to cost $19,270 per year, due at the beginning of each year. How much must you set aside at the end of each year for your child to attend four years of college. You will not make any more deposit after the child turns 18. Assume an interest rate of 9.06%.
You are saving for the college education of your child. You estimate your child's college expenses...
You are saving for the college education of your child. You estimate your child's college expenses to be $30,000 per year and payable at the beginning of each academic year. The annual interest rate is 5% and it is not expected to change. You will also have to pay $17,000 at the end of year 3 and $1,000 at the end of year 4. At the point your child is about to start college, what is the present value of...
You would like your child, who was born today, to attend a private university for 4...
You would like your child, who was born today, to attend a private university for 4 years beginning at age 18. Tuition is currently $20,000 per year and has increased 5% annually. Your after-tax rate of return is 8%. How much must you save at the end of each year if you would like to make your last payment at the beginning of your child's first year of college? (inflation rate is 2%) 4629.73 7459.63 4930.68 20000
You are currently saving for your child's college education. The current cost of college is $10,000...
You are currently saving for your child's college education. The current cost of college is $10,000 a year. You expect that college costs will continue to increase at a rate of 5 percent a year. Your child is scheduled to begin attending a four-year college 10 years from now (i.e., college payments will be made at t=10, t=11, t=12, and t=13). You currently have $25,000 in an account which earns 6 percent after taxes. You would like to have all...