On the day that his first child was born, Ezio Auditore de Firenze deposited $6,200 into an investmentaccount. The onl...

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On the day that his first child was born, Ezio Auditore de Firenze deposited $6,200 into an investmentaccount. The onl...

On the day that his first child was born, Ezio Auditore de Firenze deposited $6,200 into an investmentaccount. The only purpose for the account was to pay for his son’s first year of college tuition. Assumethat his son, Flavia, started college on his 18th birthday and his first year tuition payment had to be made that day. The amount needed on that day was $45,000. If that was indeed the amount of money in theaccount on Flavia’s 18th birthday, what annual rate of return did Ezio earn on his investment account?

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Answer 1

Answer #1

Let the rate of return earned be x

Present value (1+Interest Rate)^Number of years = Future Value

6,200(1+x)^18 = 45,000

(1+x)^18 = 7.2580645

x = 11.6437%

i.e. 11.64%

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Answer 2

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