Elaine has just received an insurance settlement of $25 000.She wants to save this money until her daughter goes to university.If she can earn an average of 6.5 per cent,compounded annually,how much will she have saved when her daughter enters university 8 years from now?

Question

Quizplus · Accepted Answer

We can use the formula for compound interest:

A = P(1 + r/n)^(nt)

where 
A = amount after t years 
P = principal (initial amount) 
r = interest rate (as a decimal) 
n = number of times interest is compounded per year 
t = time in years

In this case, we have:

P = $25,000 
r = 6.5% = 0.065 
n = 1 (compounded annually) 
t = 8

Plugging in the values, we get:

A = $25,000(1 + 0.065/1)^(1*8) 
A = $25,000(1.065)^8 
A = $41,374.89

Therefore, Elaine will have saved $41,374.89 when her daughter enters university 8 years from now.

Elaine Has Just Received an Insurance Settlement of $25 000