On the day that his first child was born, Ezio Auditore de Firenze deposited $3,000 into an investment account. The only purpose for the account was to pay for his son’s first year of college tuition. Assume that his son, Flavia, started college on his 18t h birthday and his first year tuition payment had to be made that day. The amount needed on that day was $26,000. If that was indeed the amount of money in the account on Flavia’s 18t h birthday, what annual rate of return did Ezio earn on his investment account?
Accepted Solution
A:
Answer: about 12.75%Step-by-step explanation:Let r represent the annual rate of return. Compounded annually for 18 years, the account multiplier is (1+r)^18. Then we have ... 26,000 = 3,000(1+r)^18 (26,000/3,000)^(1/18) = 1+r . . . . . . divide by 3000, take the 18th root (26/3)^(1/18) -1 = r ≈ 12.7465%Ezio's account earned about 12.75% annually.