How would you solve this math question on compound interest? Please help!!!...

T

t

Member
...10 points!!? So this question is "The Adams family has 2 children, ages 3 and 8. The parents wish to give each of them a $5000 gift on their 18th birthdays. How much should they invest now at 7.4% p.a. compounded annually in order to have the money available for the these two gifts?

You're supposed to use the present value formula which is:
PV= A ÷ (1+ i)^n

PV = Present value formula to be invested now
A = Desired amount at a future date
i = interest rate per conversion period
n = number of conversion periods

Please help me !!
 
C

cidyah

New member
Future amount 10000
Interest rate 7.4 percent per year = 0.074
Number of times compounded per year 1
Number of years 18
Amount invested in 18 years = 10000 / ( 1 +0.074 / 1)^(18)
= 10000 / (1.074)^(18)
Amount invested before 18 years =$2,766.45
 
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