Saving for college in 20 years, a father wants to accumulate $40,000 to pay for his daughter's college expenses. If he can 6% interest, compounded quarterly, how much must he invest now to achieve his goal?

Ava-May Nelson 2020-10-26 Answered
Saving for college in 20 years, a father wants to accumulate $40,000 to pay for his daughters
You can still ask an expert for help

Expert Community at Your Service

  • Live experts 24/7
  • Questions are typically answered in as fast as 30 minutes
  • Personalized clear answers
Learn more

Solve your problem for the price of one coffee

  • Available 24/7
  • Math expert for every subject
  • Pay only if we can solve it
Ask Question

Expert Answer

Clara Reese
Answered 2020-10-27 Author has 120 answers
If P dollars are deposited in an account eqarning interest at an annual rate r, compounded n times each year, the amount A in the account after t years is given by
A=P(1+rn)nt
A=$40,000
r=6%=0.06
t=20 years
n=4(Compounded quarterly)
Thus,
40000=P(1+0.064)4(20)
40000=P(1+0.015)80
40000=P(1.015)80
40000=P(3.2906)
Divide both sides by 3.2906
P=12155.61
Final statement:
The initial deposit is $12155.61.
Not exactly what you’re looking for?
Ask My Question
Jeffrey Jordon
Answered 2021-11-03 Author has 2064 answers

Expert Community at Your Service

  • Live experts 24/7
  • Questions are typically answered in as fast as 30 minutes
  • Personalized clear answers
Learn more