Unit 5 Discussion Board Algebra - Assignment Example

Unit 5 Discussion Board The investment plan selected is 60 months U.S. Bank Certificate of Deposit (Certificate of Deposit Rates, for the grandmother who has $50,000 to invest and is looking for a plan to finance her new grandchild’s college education.The principal, P is $50,000.The annual interest rate, r for the investment is 1.39%.The time, t in years for the investment is 5 years.The number of compounding periods per year, n is 4 (assumed).The future value of Grandma’s investment as an exponential function, with time as the independent variable is given by:F(t) = $50000(1 + 0.0139/4)^4tF(t) = $50000(1.003475)^4tThe future value of Grandma’s investment is about $53,592.

15 (5 years from now).F(t) = $50000(1.003475)^4*5 = $50000(1.071843) = $53,592.15The average cost of a college education today varies between public and private collages. The average annual tuition (plus expenses) at a private nonprofit four-year college is about $35,000 and at a public four-year college is about $18,000 (The Average Cost of a U.S. College Education, 2010). Thus, grandma’s investment will be able to cover the cost in today’s dollars and also in future dollars. This is because as the college education cost grows the invested amount will also grows.

In conclusion, a grandmother, who has $50,000 to invest, is looking for a plan to finance her new grandchild’s college education. The investment plan selected is 60 months U.S. Bank Certificate of Deposit @1.39%, compounded quarterly. The future value of Grandma’s investment will be about $53,592.15 (5 years from now) and with this investment, she will be able to cover the cost in today’s dollars and also in future dollars.ReferencesCertificate of Deposit Rates. (2012, May 24). Retrieved May 24, 2012, from US Bank: http://www.usbank.com/ICWeb/productComparison.html?productCode=CDAThe Average Cost of a U.S. College Education.

(2010, August 2010). Retrieved May 24, 2012, from U.S. News: http://www.usnews.com/opinion/articles/2010/08/24/the-average-cost-of-a-us-college-education