Question

You want to have 80000 college fund in 12 years. How much will you have to deposit now under the scenario below. Assume that you make no deposits into the account after the initial deposit.

An APR of 7.5​% compounded daily

Answer 1

9514 1404 393

Answer:

$32,528.58

Explanation:

For simplicity, we'll assume each year has 365 days.

The future value A of principal amount P at rate r compounded daily for t years is ...

A = P(1 +r/365)^(365t))

We want P when A = 80,000, r = 0.075, and t = 12.

P = A/(1 +r/365)^(365t)

P = $80000/(1+0.075/365)^(365·12) ≈ $32,528.58

You will have to deposit about $32,528.58.