Prepaid college tuition plans, also known as Prepaid Education Arrangements (PEAs), allow you to prepay college tuition at present-day prices. The value of the investment is guaranteed by the state to cover public college tuition, regardless of its future cost. You are considering the purchase of an education certificate for$25,000, which will cover the future tuition costs of your 8-year-old daughter. You expect the tuition costs of your daughter’s bachelor’s degree to total $50,000 in 10 years. What would your personal discount rate need to be in order for it to be worthwhile for you to make the investment and purchase the certificate?
