Question

Ann and Tom want to establish a fund for their grandsons college education. What lump sum must they deposit at a 10.2% annual interest rate, compounded annually, to have 40,000 in the fund at the end of 15 years...what amount of money should they deposit?? please help!!

Answer 1

The equation needed is:
\[\large A=P(1+r)^{n}\ ............(1)\]
where A is the amount after n years
P is the principal
r is the annual interest rate expressed as a decimal.
Plugging the given values in (1) we get:
\[\large 40,000=P(1+0.0102)^{15}\ ...........(2)\]
Now you need to solve equation (2) to find the value of P.