Question

A parent on the day the child is born wishes to determine what lump sum would have to be paid into an account bearing interest at 5% compounded annually, in order to withdraw P20,000 each on the child’s 18th, 19th, 20th and 21st birthdays. How much is the lump sum amount?

Help please

Answer 1

@mathmate

Answer 2

@ganeshie8

Answer 3

@Preetha

Answer 4

@.

Answer 5

@.Sam.

Answer 6

discount those payments back at 5% to today. ie calculate their present values at 5%.

so you will have \(\huge \Sigma_{n=18}^{21} \frac{20} {(1+5\%)^n } \)

Answer 7

@irishboy123 nice!