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Popular Word Problems >

Joel and Asia have a new grandson. How much money should they invest now so that he will have 73,000 for his college education in 18 years? The money is invested at 4.7% compounded quarterly.

Solution

J oe l an d A s ia ha v e a n e w g r an d so n . Ho w m u c h m o n ey s h o u l d t h ey in v es t n o w so t ha t h e w i ll ha v e 73, 000 f or hi s co ll e g e e d u c a t i o n in 18 ye a rs ? T h e m o n ey i s in v es t e d a t 4.7% co m p o u n d e d q u a r t er l y .

Solution

Principal : 31481.22

Solution steps

Translate the problem into an equation:

73000 = P (1 + \frac{0.047}{4})^{4 \cdot 18}

Solve for

P, 73000 = P (1 + \frac{0.047}{4})^{4 \cdot 18} : P = 31481.22

Principal : 31481.22

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