When your first child is born, you begin to save for college by depositing $500 per month in an account paying 12% interest per year. You increase the amount you save by 2% per year. With continuous investment and compounding, how much will you have accumulated in the account by the time your child enters college 18 years later Round your answer to the nearest cent.
A)$434,268.49
B) $4,342.68
C) $4,247,097.21
D) $5,052.23
E) $50,082.07

Question

When your first child is born, you begin to save for college by depositing $500 per month in an account paying 12% interest per year. You increase the amount you save by 2% per year. With continuous investment and compounding, how much will you have accumulated in the account by the time your child enters college 18 years later  Round your answer to the nearest cent.  
A)$434,268.49
B) $4,342.68
C) $4,247,097.21
D) $5,052.23
E) $50,082.07

Quizplus · Accepted Answer

This problem involves calculating the future value of a series of increasing payments in an account that compounds interest annually. Given the annual interest rate of 12%, monthly deposits of $500 increasing by 2% per year, and a period of 18 years, the correct calculation leads to an amount closest to $434,268.49, making option A the correct answer. This involves understanding the formula for the future value of a growing annuity, taking into account the annual increase in deposits and the compounding interest.

When Your First Child Is Born, You Begin to Save