Selena wants to have enough funds to cover $13 000 per year for four years of her daughter's university expenses and will need the money at the beginning of each year.If her funds get an annual return of 4.3 percent,how much would she need to have in the account when her daughter starts university?
A)$48 764
B)$46 857
C)$52 000
D)$48 872

Question

Quizplus · Accepted Answer

We can solve the problem using the present value of an annuity formula:

PV = PMT × (1 - 1/(1 + r)^n) / r

where PV is the present value, PMT is the annual payment, r is the annual interest rate, and n is the number of years.

Substituting the given values, we get:

PV = $13,000 × (1 - 1/(1 + 0.043)^4) / 0.043
   = $13,000 × 3.583218
   = $46,676.84
 
Therefore, Selena would need to have $46,676.84 in the account when her daughter starts university.

The closest option to this value is D) $48,872. While it is not an exact match, it is the best choice given the options provided.

Selena Wants to Have Enough Funds to Cover $13 000