document.write( "Question 1131691: How much should parents invest on each of their child's first 18 birthdays to provide $25,000 per year for the next 4 years if the investment pays 4% interest? (See Example 8.) (Round your final answer to two decimal places.) \n" ); document.write( "

Algebra.Com's Answer #748722 by greenestamps(13219) $\"\"$ $\"About$

You can put this solution on YOUR website!

\n" ); document.write( "Realistically, the investment continues accruing interest after the child starts taking out $25,000 per year. Furthermore, the problem seems to be about saving for college expenses; when the child starts taking money out of the investment, it is realistic that he takes the $25000 per year out at the beginning of each year of college.

\n" ); document.write( "So we first need to calculate how much money needs to be in the investment in order to be able to make withdrawals of $25,000 at the beginning of each year for 4 years, if interest is 4% compounded annually.

\n" ); document.write( " $\"25000%28%281-%281.04%29%5E%28-4%29%29%281.04%29%29%2F.04+=+94377.28\"$

\n" ); document.write( "And now we need to calculate how much the parents should invest at the end of each year for 18 years to accumulate that amount, if again interest is 4% compounded annually.

\n" ); document.write( " $\"94377.28+=+x%28%281.04%5E18-1%29%29%2F.04%29\"$
\n" ); document.write( " $\"x+=+3680.08\"$

\n" ); document.write( "Answer: The parents need to make contributions of $3680.08 on their child's first 18 birthdays to provide $25,000 at the beginning of each of the child's next 4 years, presumably at college. \n" ); document.write( "

\n" );