Answered

Cory is saving for his son's college education. If the savings account earns 2.8% interest
compounded monthly, and he wants to have $25,000 in 18 years, what must the principal
be? Round your answer to the nearest dollar.

Answer :

HUYNHTHIENDYGO

Answer:

principal is $15112

Step-by-step explanation:

25000=P(1+ 0.028/12)^(12times18)

MRROYALGO

The principal amount of the savings is $15111.6

How to determine the principal amount?

The given parameters are:

  • Interest rate, r = 2.8%
  • Amount, A = $25,000
  • Time, t = 18 years
  • Number of times compounded, n = 12 i.e. monthly

Amount is calculated using:

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

So, we have:

25000 = P(1 + 2.8%/12)^(12 * 18)

Make P the subject

P = 25000/(1 + 2.8%/12)^(12 * 18)

Evaluate the expression

P = 15111.6

Hence, the principal amount is $15111.6

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