Question

Ann and tom want to establish a fund for their grandson's college education. What lump sum deposit at a 12.7% annual interest rate compounded annually interest rate in order to have 20,000 in the fund at the end of 15 years

Answer 1

2,683.34

Explanation:

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

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

A=20,000

r=12.7%=0.127

t=15

n=12

P=?

P=20,000/(1+/0.127/12)^12.7*15

=20,000/(1+0.0106)^190.5

=20,000/(1.0106)^190.5

=20,000/7.4534

P=2,683.3391

Approximately

P=2,683.34