Compounded annually

Question

The parents of a baby want to provide for the child's college education. How much should be deposited on each of the child's first 17 birthdays to be able to withdraw $10,000 on each of the next four birthdays? Assume an interest rate of 8%, compounded annually.

Answer 1

P(1 + r)^t = new balance

 

P(1.08)^17 = $40,000

 

3.7P = $40,000

 

P = $10, 810