Solve the problem.
-The average cost of a 4-year college education is projected to be $120,000 in 15 years. How much money should be invested now at 7.5%, compounded quarterly, to provide $120,000 in 15 years?

Question

Quizplus · Accepted Answer

To find the present value (the amount that should be invested now) to achieve a future value of $120,000 in 15 years at an interest rate of 7.5% compounded quarterly, we use the formula for the present value of a single sum: $PV = \frac{FV}{(1 + r/n)^{nt}}$, where PV is the present value, FV is the future value ($120,000), r is the annual interest rate (7.5% or 0.075), n is the number of times the interest is compounded per year (4 for quarterly), and t is the time in years (15). Plugging in the values, we get $PV = \frac{120,000}{(1 + 0.075/4)^{4*15}}$, which calculates to approximately $39,366.24.

Solve the Problem. -The Average Cost of a 4-Year College Education Is Projected