SOLUTION: 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 or

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!
Answer by orca(409) (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:

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

Solving for P, we have

So
P = 40251

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