Solve the problem.
-The average cost of a 4-year college education is projected to be $100,000 in 15 years. How much Money should be invested now at 3.5%, compounded quarterly, to provide $100,000 in 15 years?
A) $59,290.78
B) $35,153.96
C) $100,000.00
D) $87,749.93

Question

Quizplus · Accepted Answer

To find the present value (the amount that should be invested now) to achieve a future value of $100,000 in 15 years at an interest rate of 3.5% compounded quarterly, we use the formula for the present value of a single sum: $PV = \frac{FV}{(1 + r)^n}$, where FV is the future value, r is the interest rate per period, and n is the total number of periods. Here, r = 3.5%/4 = 0.875% per quarter, and n = 15 years * 4 quarters/year = 60 quarters. Plugging these values into the formula gives the present value required to reach $100,000 in 15 years, which matches choice A.

Solve the Problem. -The Average Cost of a 4-Year College Education Is Projected