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How much must be deposited today into the following account in order to have a $135,000 college fund in 14 years? Assume no additional deposits are made. An account with annual compounding and an APR of ​ 5 . 7 %

User Gnzlbg
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1 Answer

1 vote

Answer:

$62,127.51

Explanation:

To find out how much must be deposited today into an account with a 5.7% APR compounded annually to achieve a balance of $135,000 in 14 years, we can use the compound interest formula.

Compound Interest Formula


\large \text{$ \sf A=P\left(1+(r)/(n)\right)^(nt) $}

where:

  • A is the account balance.
  • P is the principal amount invested.
  • r is the interest rate (in decimal form).
  • n is the number of times interest is applied per year.
  • t is the time (in years).

In this case:

  • A = $135,000
  • r = 5.7% = 0.057
  • n = 1 (annually)
  • t = 14 years

Substitute the given values into the formula and solve for P:


\sf 135000=P\left(1+(0.057)/(1)\right)^(1 * 14)


\sf 135000=P\left(1+0.057\right)^(14)


\sf 135000=P\left(1.057\right)^(14)


\sf 135000=P(2.1729504456...)


\sf P=(135000)/(2.1729504456...)


\sf P=62127.50975...


\sf P=62127.51\; (2\;d.p.)

Therefore, the amount that must be deposited is $62,127.51 (rounded to the nearest cent).

User Equality
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