Posted by David on Tuesday, June 5, 2012 at 7:46pm.
No investment will guarantee you that kind of interest or dividends.
The only guaranteed investments for this period of time are certificates of deposit, savings accounts, and money market accounts. At best, they are paying about 1% apr.
If you invest $25 a week for 1 1/2 years, the best you can hope for is about $2,000, about half of your goal.
So I will assume you are working at 52 weeks a year, with a time of 2 years, making it 104 deposits of $25
( I am not familiar with the terminology of naming the years in college, I will assume that a "junior" is in the 3rd year ? )
let the weekly rate be i
25((1+i)^104 - 1)/i = 4000
This is not an easy equation to solve, and would require something along the lines of Newton's Method to solve. I will "cheat" and use Wolfram to solve it
http://www.wolframalpha.com/input/?i=25%28+%281%2Bx%29%5E104+-+1%29%2Fx+%3D+4000
it gave me i = .0078618 (I used x in the equation)
so the annual rate compounded weekly is
.4088 or 40.88%
As Ms Sue pointed out, this is a totally ridiculous rate of interest, making this a rather silly question.
What school gives this impossible question?
Besides -- the father isn't giving his son a gift if he takes away his allowance!
Yikes!
Thanks Ms Sue its my daughters problem ,my responce was maybe the wording might be asking "what investment " might be what amounts in what types of investments would yield the $4ooo. Or it might be just be about the math and analizing it. Either way ,thank you
You're welcome.
I'd certainly look into the kind of education your daughter is getting. This question misuses the word "gift," as well as posing a ridiculous math problem. It gives students the idea that they can "invest" and make tons of money. That simply is not true!