You decide you want your child to be a millionaire. You have a daughter today and...

You decide you want your child to be a millionaire. You have a daughter today and you deposit $59,000 in an investment account that earns 7.5% per year. The money in the account will be distributed to your daughter whenever the total reaches $3,750,000. How old will your daughter be when she gets the money (rounded to the nearest year)?

Please show work

Solutions

Expert Solution

You deposit $59,000 in an account on the day your daughter is born.

Future Value of the Investment you want to accumulate = $3750,000

Calculating the no of years it would take to accumulate the amount using FV of annuity due formula:-

Where, C= Periodic Payments = $59,000

r = Periodic Interest rate = 7.5%

n= no of periods

Future Value =$3750,000

Taking Log on both sides,

0.7351493084 = n*0.031408464252

n = 23.41

So, it would take 23 years to accumulate $3750,000

Thus, your daughter would be ''23 years" old when she can gets the money

If you need any clarification, you can ask in comments.

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jeff jeffy answered 1 year ago

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