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13 November, 21:15

John and Mary Rich invested $15,000 in a savings account paying 5.25% interest at the time their son, Mike, was born. The money is to be used by Mike for his college education. On his 18th birthday, Mike withdraws the money from his savings account. How much did Mike withdraw from his account?

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  1. 13 November, 21:21
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    The amount that Mike withdraws from his account is $37678.11265

    Explanation:

    This question requires to calculate the future value of the amount invested at a rate of 5.25% for 18 years. We will simply use the formula for future value.

    The formula for future value is,

    FV = Present Value * (1+r) ^t

    Where,

    r is the interest rate t is the time period Here the time period is in years and is 18 years or t = 18

    FV = 15000 * (1+0.0525) ^18

    FV = $37678.11265
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