Answer:
$55,000
Step-by-step explanation:
We have been given that Parents wish to have 90000 available for a child's education. The child is now 8 years old. We are asked to find the amount of money that parents must set aside at 5% compounded semiannually to meet their financial goal when the child is 18.
We will use compound interest formula to solve our given problem.
, where,
A = Final amount
P = Principal amount,
r = Annual interest rate in decimal form,
n = Number of times interest is compounded per year.
t = Time in years.
n=2 because it's compounded semiannually.
t=18-8 = 10
using formula for compound interest:
A= P(1+r/n)^nt
90000=P(1+0.05/2)^2×10
90000=P(1+0.025)^20
90000=P(1.025)^20
90000=P(1.63861644)
p=90000/1.63861644
P= $ 54,924.38486
to the nearest dollar P= $54,924
= $55,000 to the nearest dollar
<h3>Therefore, an amount of $$55,000 must be set aside to meet their financial goal when the child is 18.</h3>
