Question

Compute the requested value(s) for each scenario. Show all component numbers that factor into determination of the final answer(s) in separate cells. You have determined that $120,000 will be required 18 years from now to help pay for your daughter's higher education. If your bank is paying 6.25% annual rate of return on its 'College Opportunity' account, how much must you deposit each quarter to reach your goal?

Answer 1

To reach a goal of $120,000 in 18 years, with a 6.25% annual rate of return, you need to calculate the amount you must deposit each quarter.

Step-by-step explanation:

To calculate how much you must deposit each quarter to reach your goal, you can use the formula for compound interest:

FV = PV(1+i)^n

Where:

• FV is the future value (the desired amount you want to accumulate)
• PV is the present value (the amount you need to deposit each quarter)
• i is the interest rate per compounding period (in this case, 6.25% divided by 4 to account for quarterly compounding)
• n is the number of compounding periods (in this case, 18 years multiplied by 4 to account for quarterly deposits)

Plugging in the values, we have:

$120,000 = PV(1+0.0625/4)^(18*4)

You can solve for PV to find the amount you need to deposit each quarter.