Question

11 Calculating Interest Rates. Assume the total cost of a college education will be $250,000 when your child enters college in 18 years. You presently have $25,000 to invest. What annual rate of interest must you earn on your investment to cover the cost of your child's college education? Calculating the Number of Periods. At 10 percent interest, how long does it take to double your money? To quadruple it? 12

Answer 1

Answer 11:

PV = $25,000

FV = $250,000

NPER = 18 YEARS

PMT = 0

Required annual rate of interest = RATE (nper, pmt, pv, fv, type) = RATE (18, 0, -25000, 250000, 0) = 13.65%

Required annual rate of interest = 13.65%

Answer 12:

Time required to double:

Let us assume: PV = $100

FV = $200

RATE = 10%

Number of periods required = NPER (rate, pmt, pv, fv, type) = NPER (10%, 0, -100, 200, 0) = 7.27 Years

Number of periods required = 7.27 Years

Time required to quadruple:

Let us assume: PV = $100

FV = $400

RATE = 10%

Number of periods required = NPER (rate, pmt, pv, fv, type) = NPER (10%, 0, -100, 400, 0) = 14.55 Years

Number of periods required = 14.55 Years