What is the investment amount needed? Amy Monroe wants to create a fund today th

Question

What is the investment amount needed?

Amy Monroe wants to create a fund today that will enable her to withdraw $34,550 per year for 8 years, with the first withdrawal to take place 5 years from today. If the fund earns 11% interest, how much must Amy invest today? (Round the answer to zero decimal places, e.g. 120,250. Hint: Use tables in text.)

Investment amount $ What is the investment amount needed? Amy Monroe wants to create a fund today that will enable her to withdraw $34,550 per year for 8 years, with the first withdrawal to take place 5 years from today. If the fund earns 11% interest, how much must Amy invest today?

Explanation / Answer

LET THE FUND VALUE TO BE CREATED BE "x"

Future value of the fund created = x*(1.11^4)

=1.518x

PRESENT VALUE OF THE WITHDRAWLS AT THE END OF 4TH YEAR = 34550*PVIFA(11%,8)

=34550*5.1461

=177798

therefore, 1.518x = 177798

therefore, x = 177798/1.518

=117126.48 ANSWER

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.