Question

Brenda young desires to have $14400 saved after 18 years from now for her kid's college fund. if she will earn 2 percent (compounded annually) on her money, what amount should she deposit now?

Answer 1

To have $14,400 saved after 18 years with an annual interest rate of 2% compounded annually, Brenda should deposit approximately $8,707.05 now.

Step-by-step explanation:

To find out how much Brenda needs to deposit now, we can use the formula for compound interest: A = P(1 + r/n)^(nt), where:

• A is the future amount Brenda wants to have ($14,400)
• P is the principal amount to be deposited now (what we need to find)
• r is the annual interest rate (2% or 0.02)
• n is the number of times interest is compounded per year (1 for annually compounded interest)
• t is the number of years (18)

Plugging in these values into the formula: 14,400 = P(1 + 0.02/1)^(1*18)

Simplifying the equation:

14,400 = P(1.02)^18

Dividing both sides by (1.02)^18 gives us:

P ≈ 14,400 / (1.02)^18 ≈ $8,707.05

Rounded to the nearest dollar, Brenda should deposit approximately $8,707.05 now.