Question

Your cousin is currently 14 years old. She will be going to college in 4 years. Your aunt and uncle would like to have $ 115 comma 000 in a savings account to fund her education at that time. If the account promises to pay a fixed interest rate of 3.7 % per​ year, how much money do they need to put into the account today to ensure that they will have $ 115 comma 000 in 4 ​years?

Answer 1

Answer:

they need to put into the account $99444.97

Explanation:

given data

age = 14 year

time period = 4  year

saving account  = $115000

fixed interest rate = 3.7% per​ year = 0.037

future value = $115000

solution

we get here present value that is express as

present value = $\frac{future\ value }{(1+ rate)^t}$     ..........................1

put here value and we get

present value = $\frac{115000}{(1+ 0.037)^{4}}$      

solve it we get  

present value = $99444.97

so they need to put into the account $99444.97