Answer:
8.87%
Explanation:
Calculation for the annual rate of interest you must earn on your investment to cover the cost of your child’s college education
Using this formula
FV = PV(1 + r)t
Based on the information we were told to calculate for annual rate of return, this means we would be Solving for r
r = (FV / PV)1 / t– 1
Where,
FV =$300,000
PV=$65,000
=1 / t =1/18 years
Let plug in the formula
r = ($300,000 / $65,000)1/18– 1
r=(4.6153846)^0.055555 -1
r=1.08867-1
r= 0.0887 *100
r=8.87%
Therefore the annual rate of interest you must earn on your investment to cover the cost of your child’s college education will be 8.87%
