Question

Korey and I have been working with a financial planner named Stephen for years. He's been so good to us in explaining things like retirement, high yield savings, life insurance and college planning. This last time that we met with Stephen he explained to us that our money for the kids college savings account could be modeled with an equation to help my math brain see the big picture.

Currently, our savings account for the kids college is modeled by A of x equals 20000 times 1.05 raised to the x minus 1 power .

He explained that with inflation that we really needed to have a steady increase in our savings to be able to pay for both kids college funds. Stephen suggested that we look at how much money we would have if we didn't deposit any more money in our savings account and just relied on the interest to build based on this equation. He gave us a random number of 5% for the interest rate as shown in the model above and x is the number of years.

A) Is this sequence arithmetic, geometric, or neither?

B) Break apart the equation -Tell me what each of those terms represent above in the A(x) equation.

C) How much money would we have if we only did interest on this account in 11 years when Kolton starts college?

SHOW ALL MATH WORK AND EXPLANATIONS FOR THIS FROM START TO FINISH! IT'S A 10 POINT PROBLEM!

Answer 1

A) This sequence is geometric.

B) In the equation A(x) = 20000(1.05)^(x-1):

A(x) represents the amount of money in the savings account after x years.

20000 represents the initial amount of money in the savings account.

1.05 represents the interest rate, which is compounded annually.

(x-1) represents the number of compounding periods, which is one less than the number of years because the initial amount is not compounded.

C) To find out how much money we would have in the savings account in 11 years when Kolton starts college, we can substitute x = 11 into the equation and simplify:

A(11) = 20000(1.05)^(11-1)

A(11) = 20000(1.05)^10

A(11) ≈ 35,123.58

Therefore, if we only relied on the interest to build our savings for 11 years, we would have approximately $35,123.58 in the savings account when Kolton starts college. However, this amount may not be enough to cover the total cost of college, so it is important to continue making regular deposits to the savings account.