Question

A couple plans to invest money into an account that earns 9% interest, compounded quarterly, for their child's college education. What principal must be deposited by the parents in order to have $25,000 after 13 years?

Answer 1

$282.98

Explanation:

For computing the principal amount we need to apply the present value function i.e to be shown in the attachment below:

Data provided that in question

Future value = $25,000

Rate of interest = 9%

NPER = 13 years × 4 quarters = 52 quarters

PMT = $0

The formula is shown below:

= -PV(Rate;NPER;PMT;FV;type)

So, after applying the above formula, the present value is $282.98