Answer:
Rate of interest will be equal to 21.5 %
Explanation:
We have given future value A = $50000
Time period n = 18 years
It is given that he can afford to pay $1500 a year
So principal amount P = $1500
We have to find the rate of interest
We know that amount is given by
[tex]A=P(1+\frac{r}{100})^n[/tex]
So [tex]50000=1500(1+\frac{r}{100})^{18}[/tex]
[tex]33.33=(1+0.01r)^{18}[/tex]
[tex](1+0.01r)=(33.33)^{\frac{1}{18}}[/tex]
[tex](1+0.01r)=1.215[/tex]
[tex]0.01r=0.215[/tex]
[tex]r=21.5[/tex] %
So rate of interest will be equal to 21.5 %
