Mr. and Mrs. Sanchez hope to send their daughter to college in fourteen years. How much money should they invest now at an interest rate of 9.5% per year, compounded continuously, in order to be able to contribute $9500 to her education?

Mr. and Mrs. Sanchez need to invest $2666 for 14 years in order to be able to contribute $9500 to her education.

A compound interest is given by the formula:

Where A is the final amount, r is the rate, t is the period, P is the principal and n is the number of times compounded in a period.

Given that A = 9500, r = 9.5% = 0.095, t = 14, n = 1. hence:

Mr. and Mrs. Sanchez need to invest $2666 for 14 years in order to be able to contribute $9500 to her education.

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Principle (P) = $2,512.56 (Approx)

Step-by-step explanation:

Given:

Interest annually (R) = 9.5% = 0.095

Amount need (A) = $9500

Time period (T) = 14 years

Find:

Principle (P)

Computation:

A = P[e^(R*T)]

9,500 = P[e^(0.095 x 14)]

9,500 = P[3.781]

P = 9,500 / 3.781

Principle (P) = $2,512.56 (Approx)

step-by-step explanation:

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