What rate of return will Dr. Stein need to achieve his goal, if he has just invested $6,250 for his son (age one). The money will be used for his son's education 17 years from now. He calculates that he will need $50,000.00 for his son's education by the time the boy goes to school. What rate of return will Dr. Stein need to achieve this goal?

The exact formula will depend on the compounding assumption. But using an annual assumption to illustrate the basic approach: You want to solve for r, where



which leads you to the solution for the required return r