Posted: October 16th, 2022

Finance, Value of Money

QUESTION 1: Assume the total cost of a college education will be $380,000 when your child enters college in 16 years. You presently have $62,000 to invest.

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Required:

What annual rate of interest must you earn on your investment to cover the cost of your child’s college education?

At 6.75 percent interest, how long does it take to double your money?

 

At 6.75 percent interest, how long does it take to quadruple your money?

 

 

QUESTION2: 

In 1904, the first U.S. Open Golf Championship was held. The winner’s prize money was $240. In 2012, the winner’s check was $1,440,000.

 

Requirement 1:

What was the annual percentage increase in the winner’s check over this period? 

 

Requirement 2:

If the winner’s prize increases at the same rate, what will it be in 2036?

 

 

QUESTION 3: You have decided that you want to be a millionaire when you retire in 44 years.

 

Requirement 1:

If you can earn an annual return of 11.22 percent, how much do you have to invest today? 

Requirement 2:

What if you can earn an annual return of 5.61 percent?

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