SOLUTION: Natasha recently had a baby girl and wants to place her baby shower money into an account that earns 8% enterest monthly. She needs $80,000 in this account to pay for her daughters

Question 434253: Natasha recently had a baby girl and wants to place her baby shower money into an account that earns 8% enterest monthly. She needs $80,000 in this account to pay for her daughters college in 18 years. How much money would she need to put into this account now, in order to have that $80,000 in 18 years?
Answer by htmentor(1343) (Show Source): You can put this solution on YOUR website!
Surely you must mean 8% interest ANNUALLY, not MONTHLY!
Assuming it's 8% interest compounded annually, we can write the following formula:

where P0 is the inital principal, P is the present value, r is the annual interest rate, and n is the period in years.
In this problem, P = 80000, r = 0.08, and n = 18
So we can write
Solve for P0:

So the initial investment was $20020
---------------------------------------------
If the 8% annual interest is compounded monthly, then the rate would be r=0.08/12 and n=18*12
In that case, the initial investment would be:
= $19045

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