COMPOUND INTEREST

Question

Hector and Yolanda want to establish a fund for their grandson's college education. What lump sum must they deposit at a 10.7% annual interest rate, compounded quarterly, in order to have $40,000 in the fund at the end of 10 years?

 

PLEASE GIVE ANSWER. ROUND TO NEXT DOLLAR AS NEEDED.

Answer 1

the underlying compound interest formula that you want to use to solve this one is

A = P(1 + r/n)^nt

for this scenario that means solving for P algebraically and then plugging in the given parameters

P = 40000 / (1 + 0.107/4)^(4*10)

P = 40000 / 2.8747

P = 13914.63

meaning that if you invest $13,914.63 now it will grow to $40,000 in 10 years

Answer 2

30000 = p(1 + 0.127/4)^(4)(15)

 

Can you calculate?