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Christine needs to invest to help with her child's college fund. How much would she have to invest to have $79,400 after 15 years, assuming an interest rate of 2.24% compounded daily? Do not round any intermediate computations, and round your final answer to the nearest dollar. If necessary, refer to the list of financial formulas. Assume there are 365 days in each year.

User Paul Rene
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Final answer:

Christine needs to invest $56,839, rounding to the nearest dollar, to reach her goal of $79,400 in 15 years with an annual interest rate of 2.24% compounded daily.

Step-by-step explanation:

To calculate how much Christine needs to invest now to have $79,400 after 15 years at an interest rate of 2.24% compounded daily, we use the formula for compound interest: P = A / (1 + r/n)^(nt). Here, A is the amount of money accumulated after n years, including interest. P is the principal amount (the initial amount of money), r is the annual interest rate (decimal), n is the number of times that interest is compounded per year, and t is the time the money is invested for in years.

Christine wants the future value A to be $79,400, r is 2.24% or 0.0224 in decimal form, n is 365 as the interest is compounded daily, and t is 15 years. Using these values, the formula becomes: P = 79400 / (1 + 0.0224/365)^(365*15).

Now we calculate the initial investment P:
P = 79400 / (1 + 0.0000613698630137)^(5475)P = 79400 / (1.0000613698630137)^(5475)P = 79400 / 1.3975865361557P = $56839.06

Therefore, Christine needs to invest $56,839, rounded to the nearest dollar, to have $79,400 after 15 years with daily compounding at a rate of 2.24%.

User Baqir Khan
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