Question 1100356: In eighteen years, you will want to help her pay for college. How much do you need to invest now at 4.75% interest compounded monthly so you can help her pay for the $40,000 expense of college?
Answer by Theo(13342)   (Show Source):
You can put this solution on YOUR website! annual interest rate = 4.75% compounded monthly.
4.75% = .0475
.0475 / 12 = .0039583333 = monthly interest rate.
18 years * 12 = 216 months
formula is f = p * (1 + r) ^ n
f is the future value
p is the present value
r is the interest rate per time period (months in this case).
n is the number of time periods (months in this case).
in your problem.
f = 40,000
p = what you want to find
r = .0039583333
n = 216
formula becomes 40,000 = p * (1 + .0039583333) ^ 216
solve for p to get p = 40,000 / ((1 + .0039583333) ^ 216)
solve for p to get p = 17,040.0625
that's how much he would have to invest today so that he can have 40,000 in 18 years if he is able to invest it at 4.75% interest compounded monthly for 18 years.
here's some more financial formulas you might find useful.
https://www.algebra.com/algebra/homework/Finance/THEO-2016-04-29.lesson#notes
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