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

Answer:

$102,348.034

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:

$Future value (F) = C\times (1+R)^n\\Future value (F) = C (1+0.06)^{16}\\260,000 = C(2.54035168)$

$260,000/2.54035168 = C

$102,348.034 = C

So, Initial cash Deposit = $102,348.034