Question 916739: A trust fund for a ten year old child is being set up by a single payment so that at an age of 21 the child will receive $27,000. find how much the payment is if an interest rate of 6% compounded semi-annually is assumed.
Answer by lwsshak3(11628)   (Show Source):
You can put this solution on YOUR website! A trust fund for a ten year old child is being set up by a single payment so that at an age of 21 the child will receive $27,000. find how much the payment is if an interest rate of 6% compounded semi-annually is assumed.
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Compound Interest Formula: A=P(1+r/n)^nt, P=initial investment, r=interest rate, n=number of compounding periods per year,t=number of years, A=amt after t-years.
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For given problem:
P=(to solve)
r=.06
n=2
A=27000
t=11 yrs
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27000=P(1+.06/2)^11n
27000=P(1+.03)^22
27000=P(1.03)^22
P=27000/(1.03)^22
P=14091
single payment for trust fund=$14,091
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