Question

Suppose someone wants to accumulate ​$55, for a college fund over the next 15 years. Determine whether the following investment plans will allow the person to reach the goal. Assume the compounding and payment periods are the same. The person deposits ​$130 per month into an account with an APR of 5​%. Will the person meet the​ goal? Select the correct choice below and fill in the answer box to complete your choice. ​(Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as​ needed.)

A. No​, because the amount that will be in the college​ fund, _______​$​, is less than the goal of ​$55.

B. Yes​, because the amount that will be in the college​ fund,_______ ​$​, is more than the goal of ​$55.

Answer 1

Information provided:

Monthly deposit= $130

Interest rate= 5%/12= 0.4167% per month

Time= 15 years*12= 180 months

The question is solved by calculating the future value.

Enter the below in a financial calculator to compute the future value:

PMT= 130

N= 180

I/Y= 0.4167

Press the CPT key and FV to compute the future value.

The value obtained is 34,747.56.

Therefore, the person will have $34,747.56 and can meet his goal.

Hence, the answer is option b.

The question is solved by calculating the future value.