Answer:
The lump sum amount to be deposited should be $27,020.67
Explanation:
Data provided in the question:
Future value = $60,000
Time, t = 10 years
Interest rate, r = 8% = 0.08
Compounded monthly i.e number of periods n = 12
Now,
Future value = Amount deposited × [tex]\left( 1 + \frac{r}{n} \right)^{\Large{n \times t}}[/tex]
Therefore,
on substituting the respective values, we get
$60,000 = Amount deposited × [tex]\left( 1 + \frac{0.08}{12} \right)^{\Large{12 \times 10}}[/tex]
or
$60,000 = Amount deposited × ( 1.00667 )¹²⁰
or
$60,000 = Amount deposited × 2.220522
or
Amount deposited = $60,000 ÷ 2.220522
or
Amount deposited = $27,020.67
Hence,
The lump sum amount to be deposited should be $27,020.67
