At your birth, your grandparents put $5,000 into a college fund for you. Now you want to use the fund to pay your first year of college costs of $23,000
To have enough money in your college fund for your stated purpose, what annual rate of return would have to have been earned on the account over an 18-year period?
What will be an ideal response?
Answer: r = (FV/PV)1/n - 1 = ($23,000/$5,000)1/18 - 1 = 8.85% per year.
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