SOLUTION: Hi: I'm stuck on a trying to remember the formula for the following question and was hoping you could help. If it matters, it's listed under the topic of "college fund." The qu

Question 1068055: Hi:
I'm stuck on a trying to remember the formula for the following question and was hoping you could help. If it matters, it's listed under the topic of "college fund." The question reads - How much mush you deposit today into the following account in order to have a $120,000 college fund in 15 yrs? Assume no additional deposits are made. This has an APR of 4% compounded daily. I have:
A = $120,000
Y = 15
APR = .04
n = 365
Thank you.
Found 2 solutions by addingup, MathTherapy:
Answer by addingup(3677) (Show Source): You can put this solution on YOUR website!
Principal(1+rate/n(t) = Amount (n is the number of compounding periods:365: t is the time:15 years)
P(1+0.4/365)^(365(15)) = 120,000
P = 120,000 � 1.822 = 65,861.69
Answer by MathTherapy(10552) (Show Source): You can put this solution on YOUR website!

Hi:
I'm stuck on a trying to remember the formula for the following question and was hoping you could help. If it matters, it's listed under the topic of "college fund." The question reads - How much mush you deposit today into the following account in order to have a $120,000 college fund in 15 yrs? Assume no additional deposits are made. This has an APR of 4% compounded daily. I have:
A = $120,000
Y = 15
APR = .04
n = 365
Thank you.

When doing these types of calculations that involve DAILY COMPOUNDING, the number of ANNUAL COMPOUNDING PERIODS is 360, not 365.
As such the present value or amount you need to deposit today is:
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