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Question

A financial planning service offers a college savings program.The plan calls for you to make six annual payments of $13,500 each,with the first payment occurring today, your child’s 12th birthday.Beginning on your child’s 18th birthday, the plan will provide$27,000 per year for four years.

  

What return is this investmentoffering? ________%

Solution

xxxxxx:xx need xx arrive xx xxx xxxxx as xx 18th xxxxxxxy xx xxx amountearned xxx the xxxxxx xxxxxxxxxxxxx xxx future xxxxx of xxx xxxxxx xxxxxxxx annually xxxxxxxxx be = xxxxx * future xxxxx annuity xxxxxx x yxxxx + x becausestarting xxx xxxxx xx will xx = xxxxx*xxxxx x,x% = 27000/Presentvalue xxxxxxxx annuity xxxxxx x,x%xxxxx+ xxxxx*(x+x)^x +......+13500*(1+r)^5= xxxxx/(x+x)^x + ....+xxxxx/(x+x)^xxxxxx xxxx x = x% per xxxxx

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