If you buy the stock and plan to sell it 3 years from now, what are your expected cash flows in (i) year 1; (ii) year 2; (iii) y
1 answer:
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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 ×
Therefore,
on substituting the respective values, we get
$60,000 = Amount deposited ×
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