Andre's wonderful parents established a college savings plan for him when he was born.They deposited $50 into the account on the last day of each month.The account has earned 10.9% compounded monthly,tax-free.How much can they withdraw on his 18th birthday to spend on his education?

Question

Quizplus · Accepted Answer

Using the formula for compound interest: 
A = P(1 + r/n)^(nt)

where A is the amount after t years, P is the principal, r is the annual interest rate, n is the number of times the interest is compounded in a year, and t is the number of years.

In this case, P = $50, r = 10.9%, n = 12 (monthly compounding), and t = 18 years. So we have:
A = 50(1 + 0.109/12)^(12*18)
A = $33,306.58

Therefore, the maximum amount they can withdraw on his 18th birthday for his education is $33,306.58. So the best choice is C.

Andre's Wonderful Parents Established a College Savings Plan for Him