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Compound Interest Questions

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A) Suppose I want to have $60,682.50 in my account for my children's college education. I expect to earn an average return of 12%, compounding four times a year. If I deposit $25,000.00 today in my account, how many years will it take me to meet my goal ($60,682.50 in my account)?

b) Now suppose my goal is to have $100,000.00 in my account in ten years. Based on my information, I can earn 16%, compounding quarterly. How much money must I deposit at the end of each quarter to have the $100,000.00 in my account when I need it?

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Solution Summary

Problems involving compound interest are solved. One solves for time, the other for amount of money. All calculations are shown.

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a) FV = 60,682.50
return rate = 12%/4 = 3% each period
PV = -25,000.00
Payment = 0
by a financial ...

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