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How much should a mother invest at the time her daughter is born in order to provide her with $100,000 at age 18? Assume that the interest is 3% compounded semiannually

User Pirho
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1 Answer

26 votes
26 votes

Let the initial amount should be invested = P

The interest = 3% = 0.03

compounded semiannually, n = 2

From born to age 18, it will be 18 years

so, t = 18

So,


\begin{gathered} A=P\cdot(1+(r)/(n))^(nt) \\ \\ 100000=P\cdot(1+(0.03)/(2))^(2\cdot18) \\ \\ 100000=P\cdot(1+0.015)^(36) \\ \\ 100000=P\cdot1.709 \\ \\ P=(100000)/(1.709)=58508.97 \end{gathered}

So, the mother should invest $58,508.97

User NeoNexus DeMortis
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