Question

Ann and Tom want to establish a fund for their​ grandson's college education. What lump sum must they deposit at a 12.4% annual interest​ rate, compounded monthly​, in order to have ​$30,000 in the fund at the end of 15 ​years?

Answer 1

A=P(1+r/n)^(tn)
n=number of times per year compounded
A=amount
P=principal inveseted
r=rate in decimal
t=time in years

so


we want A=30000
r=12.4%=0.124
t=15
monthyl means n=12


30000=P(1+0.124/12)^(15*12)
solve for P
easy, just divide both sides by (1.01033)^180
4714.97=P
that much must be invested