Your friend,Justin,started college at the age of 18 with $40,559 already saved.He has this money because 18 years ago when he was born his parents placed money into a special college savings account earning 7.00% per year.How much money did Justin's parents place into his college account?
A)$12,000
B)$18,000
C)$19,262
D)$21,000

Question

Quizplus · Accepted Answer

To find out how much money Justin's parents initially placed in the account, we can use the formula for compound interest: $A = P(1 + r)^n$, where $A$ is the amount of money accumulated after n years, including interest, $P$ is the principal amount (the initial amount of money), $r$ is the annual interest rate (decimal), and $n$ is the number of years the money is invested or borrowed for. Given that $A = $40,559$, $r = 7\% = 0.07$, and $n = 18$ years, we can rearrange the formula to solve for $P$: $P = A / (1 + r)^n$. Plugging in the given values: $P = $40,559 / (1 + 0.07)^{18}$, which calculates to approximately $12,000.

Your Friend,Justin,started College at the Age of 18 with $40,559