Question

Parents wish to have $ 160 comma 000 available for a​ child's education. If the child is now 2 years​ old, how much money must be set aside at 7 % compounded semiannually to meet their financial goal when the child is​ 18?

Answer 1

Answer: Amount = $53,214.35

Explanation:

Given:

Future Value = $160000

r(semiannually) =
`(7)/(2)`= 3.5% = 0.035

n(time)=
`(18-2)*2`= 32

a(amount) = ?

Therefore, we can compute the amount using the formula for future value.

⇒
`160000 = a*[(1.035)^(32)]`

⇒
`160000 = a*[ (1.035)^(32)]`

⇒
`160000= * a`

⇒ a = $53,214.35

Therefore, the child's parent should aside $53,214 at the bank.