Question

Mary needs to invest to help with her child's college fund. How much would she have to invest to have $98,700 after 15 years, assuming an interest rate

2.19% compounded annually?
Do not round any intermediate computations, and round your final answer to the nearest dollar. If necessary, refer to the list of financial formulas.

Answer 1

Mary must invest approximately $71,102 today to achieve her goal of $98,700 in 15 years with an annual compound interest rate of 2.19%, rounded to the nearest dollar.

Step-by-step explanation:

Mary needs to calculate the present value of an investment to fulfill a future financial goal, specifically for her child's college fund.

The future value she requires is $98,700, to be achieved in 15 years, with an annual compound interest rate of 2.19%. To find the present value (PV), she needs to use the formula:
PV = FV / (1 + r)^n

Where:

• PV = Present Value
• FV = Future Value ($98,700)
• r = annual interest rate (2.19% or 0.0219)
• n = number of compounding periods (15 years)

Inserting the values into the formula, we get:
PV = $98,700 / (1 + 0.0219)^15
PV = $98,700 / (1.0219)^15
PV = $98,700 / 1.388427
PV = $71,102.43

Mary would need to invest approximately $71,102 to have $98,700 after 15 years, assuming an annual compound interest rate of 2.19%, rounded to the nearest dollar.