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Homework answers / question archive / Suppose an individual wants to have exactly $400,000 available for her child's education (a) Find the amount that would have to be invested at 13% compounded continuously, if the number of years until college is years, (Round your answer to the nearest cent
Suppose an individual wants to have exactly $400,000 available for her child's education (a) Find the amount that would have to be invested at 13% compounded continuously, if the number of years until college is years, (Round your answer to the nearest cent.) $1413887 (b) Find the amount that would have to be invested at 13% compounded continuously. If the number of years until college is 16 years. (Round your answer to the nearest cent) 549072.08 (c) Does leaving the money invested twice as long dean that half as much is needed initially explain Yes, at the given rate and amounts of time, investing half the amount for twice as long will result in an amount equal to the stated goal. No, at the given rate and amounts of time, investing half the amount for twice as long will result in an amount greater than the stated goal. No, at the given rate and amounts of time, investing hall the amount for twice as long will result in an amountless than the stated goal
FV or Amount needed =400000
a) Rate =13%
Number of years =8
Amount to be invested today =FV/EXP(r*t) =400000/EXP(13%*8)= 141381.87
b) Rate =13%
Number of years =16
Amount to be invested today =FV/EXP(r*t) =400000/EXP(13%*16)=49972.08
c) Option b is correct. The reason is that if half the amount is invested and the number of years is doubled then the FV will be more than the goal. In above example we can see that less than half investment yield the same FV.
