Question

1) Sally and James' daughter just turned 5 and they have some money that they could set aside for

their daughter. They want to make sure she will have $12,500 for her 17th birthday so she could use
that
money
to
go on an overseas trip. If they found an account that would pay 3.9% annual interest,
How much do they have to put into the account now? *

Answer 1

$7,898

Step-by-step explanation:

The $12,500 is equivalent to the future value of the invested amount.

using the formula

where A is future amount,

Pi= principal or invested amount,

t = time 12 years ( the difference between 17 and 5 years)

r= is interest rate of 3.9% or 0.039 %

A = P(1 +rt)^n

$12,500= P(1 +0.039)^12

$12,500 = P(1.5827)

P=$12,500/1.5827

P= $7,897. 89

P=$7,898