00:01
In this question, we'll be using the compound interest formula.
00:04
It'll be a is equal to p times 1 plus r o n to the power n t, where a is the amount that includes the principal sum and interest, p is the principal sum, r is the interest rate per annum in decimal, n is the number of times interest is compounded per year, and t is the period in years, the time in years.
00:32
So a recent college grad is planning to save some money to go back to grad school in two years.
00:39
So t is two years, the period is two years.
00:45
She want to have $17 ,000 saved at that point.
00:49
So the amount a is $17 ,000.
00:52
How much would she have to invest right now? that is, we want to find the principal sum p.
01:04
So to find p, the compound interest is 6 .25%, so r is 6 .25%...