Question

Mr. Obama would like his daughter to attend Harvard in 6 years when she finishes high school. Mr. Obama would like to invest enough money in a certificate of deposit (CD) now to pay for his daughter’s college expenses. If he estimates that he will need $250 thousand in 5 years, how much should he invest now in a CD that has a rate of 2.8% compounded monthly?

Answer 1

Mr. Obama should invest a minimum of 215,000 in the CD to realize his goal of 250,000. I assumed a simple compound interest to achieve the answer, however I am not that proficient in investing calculations. I would check with the institution where I am investing the CD for the best answer.