You would like to give your daughter $75,000 towards her college education 17 years from now. how much money must you set aside today for this purpose if you can earn 8 percent annually on your investments
To calculate compound interest, we use this formula: FV = PV x (1 +i)^n, where:
FV represents the future value of the investment PV represents the present value of the investment i represents the rate of interest earned each period n represents the number of periods;
So, 75,000 = PV x (1+0.08)^17; Then, 75,000 = PV x 3.61; PV = 75,000 ÷ 3.61; PV = $20,775.62;
