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 18^th birthday to spend on his education?

Question

Quizplus · Accepted Answer

First, we need to find the total amount that has been deposited into the account over the 18-year period.
$50 per month for 18 years = $50 x 12 months x 18 years = $10,800
Using the compound interest formula:
A = P(1 + r/n)^(nt)
where A is the final amount, P is the initial principal, r is the interest rate, n is the number of times compounded per year, and t is the number of years.
In this case, P = $10,800, r = 10.9% (converted to decimal form, so 0.109), n = 12 (since interest is compounded monthly), and t = 18.
A = $10,800(1 + 0.109/12)^(12*18) = $33,306.50
Therefore, Andre's parents can withdraw $33,306.50 on his 18th birthday to spend on his education. The closest answer choice to this amount is C ($33,307).

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