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31 January, 15:59

You decide to save money for your daughter's education which requires a one time payment of $60,000 in 10 years and in pursuit of this you deposit a certain amount today in a bank which offers you a return of 6%. What is the amount that you need to deposit today

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  1. 31 January, 17:37
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    The amount deposited today is $56,603.77

    Explanation:

    First of all, let us lay out the information clearly:

    final amount to be realized = $60,000

    return on investment = 6% = 0.06

    Let the amount to be invested be P

    6% of P + P = $60,000

    0.06P + P = 60,000

    1.06P = 60,000

    ∴ P = 60,000 : 1.06 = 56,603.77 (to 2 decimal places).

    Therefore, the amount deposited today, that will yield a 6% return on investment to yield $60,000 is $56,603.77
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