Mr. and Mrs. Bailey need to invest $2906.50 for eleven years so as to be able to contribute $7500 their son education.
Compound interest is given by:
[tex]A=P(1+\frac{r}{n})^{nt}[/tex]
where A is the final amount, P is principal, r is the rate and n is the times compounded per year, t is the time
Given that t = 11, n = 1, r = 9% = 0.09, A = $7500 . Hence:
[tex]7500=P(1+\frac{0.09}{1} )^{1*11}\\\\P=\$2906.50[/tex]
Mr. and Mrs. Bailey need to invest $2906.50 for eleven years so as to be able to contribute $7500 their son education.
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