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es Respondus LockDown Browser me Left 1:09-18 Tah Johnson: Attempt 1 Previous Page Page 20 of 20 Next Page Note: i is necommended that you save your respose as you complete each question Question 20 (10 points) Assume de total cost of a college education will be S300,000 when your child caters college alS years You presently have $45,000 to invest. What anual rate of interest must you earn on your investment to cover the cost of your child's college education 21.12% 31-12% 17.12% Peevious Page Page 20 of 20 Save All Responses Go to Submit Qui

Explanation / Answer

Amount required in 18 years = $300,000

Amount invested today = $45,000

Period of investment = n = 18

Let the annual rate of interest = r

Future value of investment = Amount invested*(1+r)n

$300,000 = $45,000*(1+r)18

(1+r)18 = $300,000/$45,000 = 6.667

1+r = 6.66671/18

r = 1.1112 – 1 = 0.1112 = 11.12%

Hence, correct answer is 11.12%

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