How do you do this algebra problem?
Tomas’ grandfather put $1000 in the bank for him when he was born. The account has been earning 5.25% interest compounded annually. Tomas is now 18 years old and wants to take out the money so he can go to college. How much money does he have now?
Update:Actualy i do my own Hw its just i have a final coming up and im trying to Get examples for my notes.
Comments
Use the following equation:
FV = PV(1+i)^n
where
FV = Future Value
PV = Present Value
i = Interest Rate
n = number of years
FV = $1,000*(1 + 0.0525)^18 = $2,511.87
This may pay for one semester at a technical college, and that is about it.
In order to find out how much money is needed to be initially invested for college, you have to solve the above equation for PV if you know how much it would cost to go to college in 18 years.
For example, let's say that it will cost $100,000 to attend 4 years of college. In order to find out how much money needs to be put into an account earning 5.25% interest compounded annually for 18 years, use the following equation:
PV = FV / (1 + i)^n
PV = $100,000 / (1.0525)^18 = $39,810.91
Therefore, if Tomas' grandfather invests $39,810.91 in an account earning 5.25% compounded annually, Tomas will have $100,000 18 years from now and will be able to go to college.
Since you are determining the interest you may want to start by multiplying the time (18 years) by the interest rate (5.25%) and finish by adding it to the original amount ($1000.00).
It should look like this....
18*5.25= 94.50+ 1000=1094.50
Which is not enough for college.
Seriously, do your own homework man.. Use your brain.