Questions on Word Problems: Money, Business and Interest answered by real tutors!

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Question 153154: Mark and Kate are establishing a fund for their son's college education. What lump sum must they deposit in an account that gives 8% annual interest rate, compounded monthly, in order for them to have $60,000 in the account at the end of 10 years?
Can anyone help me out? Please and thank you!: Mark and Kate are establishing a fund for their son's college education. What lump sum must they deposit in an account that gives 8% annual interest rate, compounded monthly, in order for them to have $60,000 in the account at the end of 10 years?
Can anyone help me out? Please and thank you!
Answer by orca(336) About Me  (Show Source):
You can put this solution on YOUR website!
If the bank offers monthly compounding, then at the end of n months the total amount, T, in their bank will be:
T = P(1 + r)^n
where P is the principal, r is the monthly interest rate.
Substituting
T = 60,000
n = 10*12 = 120
r = 8%/12 = 1/3%= 0.0033333
into the formula, we have
60000 = P(1+0.003333)^120
Solving for P, we have
P = 60000/(1.003333)^120
ln P = ln (60000)-120*ln (1.003333)
ln P = 11.0021-120*0.003327
ln P = 10.6029
So
P = 40251