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    caolmstead's Avatar
    caolmstead Posts: 1, Reputation: 1
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    #1

    Sep 17, 2009, 03:00 PM
    Finance: Yield
    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?
    ArcSine's Avatar
    ArcSine Posts: 969, Reputation: 106
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    #2

    Sep 17, 2009, 03:25 PM
    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
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