Question

Assume that your parents wanted to have $ 140 comma 000 saved for college by your 18th birthday and they started saving on your first birthday. They saved the same amount each year on your birthday and earned 11.0 % per year on their investments. a. How much would they have to save each year to reach their​ goal? b. If they think you will take five years instead of four to graduate and decide to have $ 180 comma 000 saved just in​ case, how much would they have to save each year to reach their new​ goal?

Answer 1

Instructions are listed below

Step-by-step explanation:

Giving the following information:

Assume that your parents wanted to have $ 140,000 saved for college by your 18th birthday and they started saving on your first birthday.

Interest= 11.0 % per year.

A) We need to find the annual payment made every birthday:

FV= {A*[(1+i)^n-1]}/i

A= annual payment

n=18

FV= 140,000

i= 0.11

Isolating A:

A= (FV*i)/[(1+i)^n-1]

A=(140,000*0.11)/[(1.11^18)-1]

A= $2778

B) Now FV= $180,000

A=(180,000*0.11)/[(1.11^18)-1]

A= $3571.72