A man wants to set up a 529 college savings account for his granddaughter. How much would he need to deposit each year into the account in order to have $50,000 saved up for when she goes to college in 17 years, assuming the account earns a 5% return?

Question

Mathematics

Lana Warren

2 July, 10:51

A man wants to set up a 529 college savings account for his granddaughter. How much would he need to deposit each year into the account in order to have $50,000 saved up for when she goes to college in 17 years, assuming the account earns a 5% return?

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Answers (1)

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Luis Bonilla · Answer 1

1937.98

Step-by-step explanation:

In the given question, to find the value to be added per year we will use the formula

P = A. r/n / (1 + r/n) ⁿ - 1

Here A = 50,000

r (rate of interest) = 5 % or 0.05.

n = 1

t = 17

P = value deposit per year

therefore, P = (50,000 X 0.05) / (1 + 0.05) ¹⁷ - 1

P = 2500 / 2.29 - 1

= 1937.98 $.

therefore, person has to deposit 1937.98 $ per month.