SOLUTION: A man wants to set up a 529 college savings account for his granddaughter. How much would he need to deposit each year into the account in order to have $40,000 saved up for when s

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Question 1204398: A man wants to set up a 529 college savings account for his granddaughter. How much would he need to deposit each year into the account in order to have $40,000 saved up for when she goes to college in 16 years, assuming the account earns a 7% return.
what is the annual deposit?
Found 3 solutions by ikleyn, josgarithmetic, math_tutor2020:
Answer by ikleyn(52803) About Me  (Show Source):
You can put this solution on YOUR website!
.

I did not get about this number 529 in your post.


What is about ?



Answer by josgarithmetic(39620) About Me  (Show Source):
You can put this solution on YOUR website!
Treat like any investment account that would take yearly deposits.

Answer by math_tutor2020(3817) About Me  (Show Source):
You can put this solution on YOUR website!

The 529 refers to the name of the type of savings account. It will not play a role in any of the calculations below.

FV = future value = $40,000
P = deposit amount per year = unknown
r = 0.07 = annual interest rate in decimal form
n = number of years = 16

Let's find the annual deposit needed.
We'll use the future value of annuity formula.
FV = P*( (1+r)^n - 1 )/r
40000 = P*( (1+0.07)^16 - 1 )/0.07
40000 = P*27.8880535509344
P = 40000/27.8880535509344
P = 1,434.30590904971
P = 1,434.31


Answer: $1,434.31