Rita promises her daughter on her 12th birthday that she will give her $12,000 for college on her 18th...

Question

Rita promises her daughter on her 12th birthday that she will give her $12,000 for college on her 18th birthday. How much does Rita need to put in the bank now if the interest rate on her account is 12% per year?
$11,685.87
$5,248.19
$6,502.12
$6,378.50

SnapAndSolve AI · Accepted Answer

To find out how much Rita needs to put in the bank now, we use the present value formula:

Present Value (PV) = $ \frac{P}{(1 + i)^t} $

Where:

P = Future value = $12,000
i = Interest rate = 12% = 0.12
t = Number of years = 18 - 12 = 6

Substitute the values into the formula:

PV = $ \frac{12000}{(1 + 0.12)^6} $

Calculate:

PV = $ \frac{12000}{(1.12)^6} $

PV = $ \frac{12000}{1.9738} $

PV = $6,502.12

Therefore, Rita needs to put $6,502.12 in the bank now.

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Rita promises her daughter on her 12th birthday that she will give her $12,000 for college on her 18th...

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