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PLEASE HELP ME SOLVE THE QUESTION BELOW

Ann and Tom want to establish a fund for their​ grandson's college education. What lump sum must they deposit at 12 ​% annual interest​ rate, compounded quarterly ​, in order to have ​20,000$ in the fund at the end of 10 ​years?

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nuhulawal20

For Ann and Tom to have ​$20,000 at the end of 10 ​years, they must deposit a sum of $6,131.14.

What is the principal?

To calculate the sum of money they must deposit, use the compound interest formula.

From the compound interest formula;

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

Given that;

  • Final amount A = 20,000
  • Interest rate r = 12% = 12/100 = 0.12
  • Compound n = quarterly = 4
  • Time t = 10 years
  • Principal P = ?

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

P = 20,000 / ( 1 + 0.12/4 )^(4×10)

P = 20,000 / ( 1.03)^40

P = 20,000 / 3.26203779

P = $6,131.14

Therefore, for Ann and Tom to have ​$20,000 at the end of 10 ​years, they must deposit a sum of $6,131.14.

Learn more about compound interest here: brainly.com/question/27128740

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