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A financial planning service offers a college savings program. The plan calls for you to make...

A financial planning service offers a college savings program. The plan calls for you to make six annual payments of $15,500 each, with the first payment occurring today, your child’s 12th birthday. Beginning on your child’s 18th birthday, the plan will provide $28,000 per year for four years. What return is this investment offering?

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Answer #1

Value of owne payments at 18th birthday=Value of plan payments at 18th birthday

15500/r*(1-1/(1+r)^6)*(1+r)*(1+r)^6=28000/r*(1-1/(1+r)^4)*(1+r)

=>r=3.7644%

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