Question

Assume someone wishes to have $85,000 10 years from now as a college education fund for a child.

How much money would have to be invested today at 6% compound interest?

Answer 1

To have $85,000 in 10 years at a 6% compound interest rate, approximately $47,446.75 would have to be invested today.

Step-by-step explanation:

To determine the amount of money that would have to be invested today at a 6% compound interest rate to have $85,000 in 10 years, we can use the formula for compound interest:

P = A / (1 + r/n)^(nt)

Where:
P = Principal amountInvested
A = Desired future amount
r = Annual interest rate (in decimal form)
n = Number of times interest is compounded per year
t = Number of years

Substituting the given values:
P = 85000 / (1 + 0.06/1)^(1*10)

P = 85000 / (1.06)^10

P ≈ 85000 / 1.790847

P ≈ 47446.75

Therefore, approximately $47,446.75 would have to be invested today to have $85,000 in 10 years at a 6% compound interest rate.