Question

Tony Ring wants to attend Northeast College. He will need $55,000 10 years from today. Assume Tony's bank pays 8% interest compounded semiannually. What must Tony deposit today so he will have $55,000 in 10 years?

Answer 1

Tony must deposit approximately $25,291.99 today in a bank account with an 8% interest rate compounded semiannually to have $55,000 in 10 years.

Step-by-step explanation:

Tony Ring needs to know how much to deposit today to have $55,000 in 10 years at an 8% interest rate compounded semiannually. To calculate this, we need to use the formula for the present value of a future amount, which is P = A / (1 + r/n)nt, where P is the present value, A is the future amount, r is the annual interest rate, n is the number of times interest is compounded per year, and t is the time in years.

Plugging in Tony's values gives us P = 55,000 / (1 + 0.08/2)2*10. By doing the math, Tony would need to deposit approximately $25,291.99 today to reach his goal in 10 years.