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msth

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you are planning for your kids future education. he is 8 years old now and will start in ten years. How much will you have to set aside each year in order to have 65,000.00 if the interest rate is 7%.

  • msth -

    455 $

    7% of 65000 = 4500

    4500 divided by 10years = 455

    : )

  • msth -

    Using the Future Amount formula
    Amount = payment( (1+i)^n - 1)/i
    let the payment be P
    Amount = 65000
    I = .07
    n = 10

    P( 1.07^10 - 1)/.07 = 65000
    P( 1.07^10 - 1) = 4550
    P = 4550/(1.07^10 - 1) = 4704.54

    The amount set aside each year for 10 yrs has to be
    $4704.54

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