At Ava's second birthday,her grandparents wanted to pool their money to buy U.S.Treasury bonds that would ultimately provide $120,000 for college expenses in 16 years.If calculating a gain of 4% interest,what dollar amount in U.S.Treasury bonds will they need to buy on Ava's second birthday?

Question

Quizplus · Accepted Answer

To calculate the dollar amount of bonds needed, we can use the formula: 
PV = FV / (1 + r)^n

Where: 
PV = Present value of the bonds (what they need to buy now) 
FV = Future value of the bonds (what they want to have in 16 years) 
r = Interest rate 
n = Number of years

Plugging in the given values, we get: 
PV = 120,000 / (1 + 0.04)^16 
PV = 64,068.56

Therefore, they need to buy $64,069 worth of U.S. Treasury bonds on Ava's second birthday to ultimately provide $120,000 for college expenses in 16 years.

At Ava's Second Birthday,her Grandparents Wanted to Pool Their Money