Question 1134162: A couple plans to save for their child's college education. What principal must be deposited by the parents when their child is born in order to have $37,000 when the child reaches the age of 18? Assume the money earns 9% interest, compounded quarterly. (Round your answer to two decimal places.)
$
Found 3 solutions by Boreal, MathTherapy, greenestamps:
Answer by Boreal(15235)   (Show Source):
You can put this solution on YOUR website! P=Po[(1+(r/n))]^72 -1 divided by (r/n). The 72 is 4 quarterly deposits for 18 years.
As an aside, $500 deposited quarterly would give $36,000 in 18 years, so the answer will be significantly less than that.
37000=Po(1+(.09/4))^72-1/(0.09/4)
=Po*3.963/0.0225, but round only at the end.
=Po*$176.14
37000/176.14=$210.06, rounding here.
This is reasonable.
Answer by MathTherapy(10552)  (Show Source):
You can put this solution on YOUR website!
A couple plans to save for their child's college education. What principal must be deposited by the parents when their child is born in order to have $37,000 when the child reaches the age of 18? Assume the money earns 9% interest, compounded quarterly. (Round your answer to two decimal places.)
$
Correct answer: 
Answer by greenestamps(13200)  (Show Source):
You can put this solution on YOUR website!
The answer from tutor @Boreal is for a different problem than the given one. His answer is the amount that must be deposited EVERY QUARTER for 18 years to have a value of $37,000 after 18 years.
This problem is simply a single deposit, earning 2.25% interest (one-fourth of the annual interest rate of 9%) each quarter for 18 years. The equation is
The result of this calculation is the answer shown by the other tutor.
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