Fund earning the given interest rate


Question: Melissa Gould wants to invest today in order to assure adequate funds for her son's college education. She estimates that her son will need $20,000 at the end of 18 years; $25,000 at the end of 19 years; $30,000 at the end of 20 years; and $40,000 at the end of 21 years. How much will Melissa have to invest in a fund today if the fund earns the following interest rate?

a. 6 percent per year with annual compounding

b. 6 percent per year with quarterly compounding

c. 6 percent per year with monthly compounding

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Finance Basics: Fund earning the given interest rate
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