Question

You would like to have $200,000 in a college fund in 15 years. How much do you need today if you expect to earn 12% while you are investing to pay for your child's college?

Answer 1

$36,529.26

Explanation:

To find the answer, you need to use the formula to calculate the present value:

PV=FV/(1+i)^n, where:

PV= present value

FV= future value= $200,000

i= interest rate= 12%

n= number of periods of time= 15

Now, you have to replace the values in the formula:

PV=200,000/(1+0.12)^15

PV=200,000/(1.12)^15

PV=36,539.26

According to this, the answer is that you need $36,529.26 today.