SOLUTION: Since the birth of their daughter, the Tranters have deposited $450 every 3 months on an education savings plan. The interest rate is 7.5%/a compounded quarterly. What is the plans
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Question 876723: Since the birth of their daughter, the Tranters have deposited $450 every 3 months on an education savings plan. The interest rate is 7.5%/a compounded quarterly. What is the plans value when their daughter turns 17?
Answer by jim_thompson5910(35256) (Show Source): You can put this solution on YOUR website!
Use this formula:
FV = P*( (1+i)^(n) - 1 )/i
where,
P = amount deposited per period
i = interest rate per period
n = number of periods
In this case,
P = 450
i = 0.075/4 = 0.01875
n = 4*17 = 68
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FV = P*( (1+i)^(n) - 1 )/i
FV = 450*( (1+0.01875)^(68) - 1 )/0.01875
FV = 60880.8110324299
FV = 60880.81
They will have $60,880.81 in the account 17 years later (assuming they keep up with every deposit)
See this article for more details:
http://www.investopedia.com/terms/f/future-value-annuity.asp
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