1.Franklin Templeton has just invested $9,460 for his son (age one). This money

Question

1.Franklin Templeton has just invested $9,460 for his son (age one). This money will be used for his son’s education 20 years from now. He calculates that he will need $44,000 by the time the boy goes to school.

What interest rate does Mr. Templeton need to earn in order to achieve this goal? (Round your final answer to 2 decimal places. For example, enter .1245 as 12.45)

2.You need to have $25,156 available at the end of 7 years. How much to do you have invest each year, starting at the end of this year, for 7 years to achieve this goal? (Enter your answer as a positive number rounded to 2 decimal places.)

Explanation / Answer

1) Future value= investment *(1+ interest rate)^years Lets assumer interest rate=r 44000=9460*(1+r)^20 Now solving for r will give r= 7.99% 2) Future value= P*((1+r)^n-1/r) wherer=7.99%, n=7 Lets assume P= annuity amount 25156=P*((1+7.99%)^7-1)/7.99% P=$2820.16

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