Question

Assume the total expense for your current year in college equals $35,000. Approximately how much would your parents have needed to invest 17 years ago in an account paying 7% compounded annually to cover this amount?

Answer 1

$11,080

Step-by-step explanation:

Use Present value formula to calculate the amount required to be invested.

PV = FV / ( 1 + r )^n

PV = present Value = ?

FV = Future Value = $35,000

r = rate of interest = 7%

n = number of years = 17 years

Putting all these value in formula:

PV = $35,000 / ( 1 + 0.07 )^17

PV = $35,000 / ( 1.07 )^17

PV = $11080.10