Ann and Tom want to establish a fund for their grandson's college education. What lump sum must they deposit at a 12.4% annual interest rate, compounded monthly , in order to have $30,000 in the fund at the end of 15 years?

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Mathematics

10 February, 04:51

Ann and Tom want to establish a fund for their grandson's college education. What lump sum must they deposit at a 12.4% annual interest rate, compounded monthly , in order to have $30,000 in the fund at the end of 15 years?

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Tristin · Answer 1

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

n=number of times per year compounded

A=amount

P=principal inveseted

r=rate in decimal

t=time in years

so

we want A=30000

r=12.4%=0.124

t=15

monthyl means n=12

30000=P (1+0.124/12) ^ (15*12)

solve for P

easy, just divide both sides by (1.01033) ^180

4714.97=P

that much must be invested