Sam hope to send his son to college in twelve years. How much money should they invest now at an interest rate of 85 compounded continuously in order to be able to contribute $9500 to her education?

Question

Do not round any intermediate computations, and round your answer to the nearest cent

Answer 1

We have continuous compounding at a rate of 85 percent, and a time frame of 12 years. We use the compound interest equation:

9500 = Pe^0.85(12)

Solving for P, we get:

P = 9500e^-0.85(12) = 0.35311

Therefore, Sam must invest 35.311 cents now in order to afford college in 12 years.