Question

a) Sixteen years ago your parents opened a saving account in your name and made a lump sum deposit, today the balance of this account is $260,000. If the account has been earning 6% compounded annually, how much did your parents initially deposit

Answer 1

$102,348.034

Step-by-step explanation:

It is a simple problem of Compound Interest, we have to find the Principle amount invested.

Given:

Future value (F) = $260,000

Rate(R) = 6% = 6/100 = 0.06

Number of years (n) = 16 years

Initial deposit (C) = ?

Calculation:

`Future value (F) = C* (1+R)^n\\Future value (F) = C (1+0.06)^(16)\\260,000 = C(2.54035168)`

$260,000/2.54035168 = C

$102,348.034 = C

So, Initial cash Deposit = $102,348.034