Question

To cover the first year’s total college tuition payments for his two children, a father will make a $75,000 payment five years from now. How much will he need to invest today to meet his first tuition goal if the investment earns 6 percent annually?

Answer 1

The father needs to invest approximately $60,548.16 today to meet his first tuition goal.

Step-by-step explanation:

To calculate how much the father needs to invest today to meet his first tuition goal, we can use the formula for the present value of a future payment:

PV = FV / (1 + i)^n

Where PV is the present value, FV is the future value, i is the annual interest rate, and n is the number of years. In this case, the future value is $75,000, the annual interest rate is 6%, and the number of years is 5. Plugging in these values, we get:

PV = $75,000 / (1 + 0.06)^5

Calculating this expression gives us a present value of approximately $60,548.16.