Question

Your cousin is currently 9 years old. She will be going to college in 9 years. Your aunt and uncle would like to have $ 100 comma 000 in a savings account to fund her education at that time. If the account promises to pay a fixed interest rate of 4.5 % per​ year, how much money do they need to put into the account today to ensure that they will have $ 100 comma 000 in 9 ​years?

Answer 1

Answer:

They need to put into the account a total of $67,290 to ensure that they will have $ 100,000 in 9 ​years.

Explanation:

We have to calculate the present value of the sum needed in 9 years ($100,000), with a annual fixed interest rate of 4.5%.

This can be calculated as:

$PV=FV/(1+i)^n\\\\PV=100,000/(1.045)^9\\\\PV=100,000/1.486\\\\PV=67,290$

They need to put into the account a total of $67,290 to ensure that they will have $ 100,000 in 9 ​years.