Question

Your cousin is currently 88 years old. She will be going to college in 1010 years. Your aunt and uncle would like to have $ 95 comma 000$95,000 in a savings account to fund her education at that time. If the account promises to pay a fixed interest rate of 4.2 %4.2% per​ year, how much money do they need to put into the account today to ensure that they will have $ 95 comma 000$95,000 in 1010 ​years?

Answer 1

PV= $62,957.35

Step-by-step explanation:

Giving the following information:

Future value= $95,000

Number of years= 10

Interest rate= 4.2%

To calculate the initial investment required to reach the objective, we need to use the following formula:

PV= FV/(1+i)^n

PV= 95,000/(1.042^10)

PV= $62,957.35