Question

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

Answer 1

The amount deposited today is $56,603.77

Step-by-step 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