5000 Some parents want to send their child to a private elem

$5000 Some parents want to send their child to a private elementary school. Tuition costs annually or $1400 quarterly, due at the beginning of the period. What is the rate of return for paying annually?

Solution

Answer:

The following formula will be used to calculate rate of return

                    = total tuition cost paying in four quarters of the year– tuition cost paying annually / tuition cost paying annually *100

   As given above the annual tuition cost is = $5,000                   

        Tuition cost of one quarter is = $1,400

So the total tuition cost of one year (four quarters) will be = $1,400 * 4 = $5,600

Putting the values in the formula

                 Rate of return = 5,600 – 5000 /5000 *100

                                         = 600/5000* 100

                                       = 12%

So the rate of return for paying annually is 12%

*( Generally we write the formula of rate of return as = current value – original value /original value * 100 )