Don has just received a cash gift of $70,000 from his rich eccentric uncle. He wants to set it aside to pay for his daughter Cynthia's college education. Cynthia will begin college in 10 years and Don's financial advisor says that she can earn 8% interest on an investment in a special college fund. How much will Don have in the fund when Cynthia begins college
Plz help.....i calculated as. 156000.....but it gives me wrong....
To calculate the future value of Don's investment, we can use the formula for compound interest:
FV = PV * (1 + r)^n
Where:
FV = Future Value
PV = Present Value (initial investment)
r = Annual interest rate (as a decimal)
n = Number of compounding periods
In this case, the present value (PV) is $70,000 and the annual interest rate (r) is 8% (or 0.08). The investment period is 10 years, so the number of compounding periods (n) is also 10.
Let's plug in these values into the formula:
FV = 70,000 * (1 + 0.08)^10
Calculating the exponent first:
FV = 70,000 * (1.08)^10
Now, let's calculate (1.08)^10:
FV = 70,000 * 1.08^10
FV ≈ 70,000 * 1.08^10
FV ≈ 70,000 * 1.8061116
FV ≈ 126,423.81
So, when Cynthia begins college, Don will have approximately $126,423.81 in the college fund.