Aunt Darla Has Agreed to Deposit a Lump Sum into an Account

question 42

Essay

Aunt Darla has agreed to deposit a lump sum into an account that pays 12% interest compounded annually in order to pay for her niece's college education. The niece estimated that she will need to withdraw $40,000 at the beginning of each year for four years to pay for room, board, tuition, and books. Aunt Darla will deposit the lump sum on August 1, 2014, and the niece will make the first withdrawal on August 1, 2020.
Required:
Determine the amount that Aunt Darla must deposit. Clearly label all work.

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Definitions:

Percent

A proportion or share in relation to a whole, represented as a part of one hundred.

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A neurotransmitter in both the central and peripheral nervous system that plays an important role in muscle movement and cognitive processes.

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The gradual reduction in cognitive abilities, such as memory, thinking, and judgment, often associated with aging or neurological conditions.

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A neurodegenerative disorder characterized by progressive cognitive deterioration together with declining activities of daily living and by neuropsychiatric symptoms.