Question

The average cost of a 4-year college education is projected to be $130,000 in 19 years. How much money should be invested now at 6.5%, compounded quarterly, to provide $130,000 in 19 years

Answer 1

Answer:

$39, 292

Explanation:

The applicable formula to calculate the present value of a projected future value is

PV =  FV  

           (1+r)n

In this case

FV = $130,000

r =6.5 % 0r  0.065

n=19

PV = 130,000

      (1 +0.065)19

PV = 130,000/3.30858

PV = $39, 292