Suppose you have a new baby. You estimate that you need $100,000 for their college education when

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Question:

Suppose you have a new baby. You estimate that you need $100,000 for their college education when they are ready to go to college in 18 years.

1. Assume you invest $10,000 in a mutual fund (e.g. money market fund) at an APR of 7% compounded quarterly. How long, to the nearest tenth of a year, will it take the $10,000 to grow to $100,000? [Solve using both methods below.]

Solve using Logarithmic Equations

Number of Years (nearest tenth): _________________Solve using the TI-84 TVM Solver

N = _______________

I % = ______________

PV = ______________ (use a negative sign at the front of the number)

PMT = _____________

FV = ______________

P/Y = _____________

C/Y = _____________

PMT (set at End)

Number of Years (nearest tenth) (5 pts.): _________________

2. At the end of 18 years, will your investment have grown to the $100,000 needed for your child’s college fund. Explain you’re your answer means, in terms of the stated goal, using the answer in #1 above.

3. Explain (show your work), how you might use one of the two methods above, to determine exactly how much money needs to be invested at 7%, compounded monthly, so your child has a college fund of $125,000 in 18 years.