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Brief Exercise 6-10
Henry Quincy wants to withdraw $37,820 each year for 11 years from a fund that earns 9% interest. (Use the tables below.)
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Question & Answer: Henry Quincy wants to withdraw $37,820 each year for 11 years from a fund that earns 9% interest. (Use the tables below.)…..
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How much must he invest today if the first withdrawal is at year-end? How much must he invest today if the first withdrawal takes place immediately? (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 458,581.)
| First withdrawal at year-end | $ |
|
| First withdrawal immediately | $ |
Expert Answer
1.Present value=$37820*Present value of annuity factor(9%,11)
=$37820*6.80519(Approx)
=$257,372(Approx).
2.Present value=$37820*Present value of annuity factor(9%,11)(Beginning of year compounding)
=$37820*7.41766(Approx)
=$280,536(Approx).
