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18.a In 1988 the average tuition per year at an Ivy League school was $2,000. The...

18.a In 1988 the average tuition per year at an Ivy League school was $2,000. The average cost in 2018 (after 20 years) is $26,536. The tuition growth rate this period is ( )%.

18.b In 1988 the average tuition per year at an Ivy League school was $2,000. The average cost in 2018 (after 30 years) is $26,536. The tuition growth rate this period is ( )%.

(please show all steps, no Excel handwritten is preferred)

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Answer #1

a.Annual payment= $2,000

Future value= $26,536

Time= 20 years

The tuition growth rate is calculated by calculating the yield to maturity

The yield to maturity is calculated by entering the below in a financial calculator:

FV= -26,536; PMT= 2,000; N= 20

Press CPT and I/Y to calculate the yield to maturity

The tuition growth rate is 4.5953% 4.60%.

b. Annual payment= $2,000

Future value= $26,536

Time= 30 years

The tuition growth rate is calculated by calculating the yield to maturity

The yield to maturity is calculated by entering the below in a financial calculator:

FV= -26,536; PMT= 2,000; N= 30

Press CPT and I/Y to calculate the yield to maturity

The tuition growth rate is 6.5490%. 6.55%.

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