Question

A couple just had a baby. How much should they invest now at 5.5% compounded weekly in order

to have $40,000 for the child’s education 17 years from now? Compute the answer to the nearest
dollar. (Assume there are 52 weeks in a year.)

Answer 1

To find the amount that the couple needs to invest now, we can use the following formula:

investment = education cost * (1 + interest rate / number of compounding periods per year) ^ (number of years * number of compounding periods per year)

Plugging in the given values, we get:

investment = $40,000 * (1 + 0.055 / 52) ^ (17 * 52)

Solving this equation, we find that the couple needs to invest $11,226.31 now to have $40,000 for the child's education in 17 years. Rounded to the nearest dollar, this is $11,226.

Explanation: