A grandmother is looking for a plan to finance her new grandchild's college education. She consists of $45,000 to invest. Search the internet and place a long-range investment plan, CD, Savings Bond and so on for the grandmother. The plan is to earn compound interest.
Compute the future value of the investment. You should use the advertised interest rate, the number of compounding periods per year and the time the funds will be invested. If you are not given the number of compounding periods a year, utilize monthly compounding.
1) The principal is $45,000. This is P.
2) Research the annual interest rate for your investment. This is r.
3) State the time in years for the investment (as in if the new grandchild will be attending college). This is t.
4) Describe the number of compounding periods per year. This is n.
5) Model the future value of Grandma's investment as the exponential function, with time as the independent variable: F(t) = P(1 + r/n) nt
6) Show all the intermediate computations and state the future value of Grandma's investment.
7) Use the Internet or library resources to find out the average cost of a college education today; will grandma's investment be capable to cover the cost in today's dollars; what about in the future?
8) What other costs, alongside tuition, might be incurred by the college-bound grandchild?
9) How much would grandmother have to invest, and at what compound interest rate and terms would grandmother have to invest this money to completely cover the grandchild's college experience? Show how you determined such values.
10) Sum up your findings in writing by using proper style and grammar.