Beginning three months from now, you want to be able to withdraw $2,200 each qua

Question

Beginning three months from now, you want to be able to withdraw $2,200 each quarter from your bank account to cover college expenses over the next five years. If the account pays 0.44 percent interest per quarter, how much do you need to have in your bank account today to meet your expense needs over the next five years? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Beginning three months from now, you want to be able to withdraw $2,200 each quarter from your bank account to cover college expenses over the next five years. If the account pays 0.44 percent interest per quarter, how much do you need to have in your bank account today to meet your expense needs over the next five years? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Explanation / Answer

Answer:

Using the formula of Present value of annuity (PVA) :

PVA   = P * [{1-(1+r)^(-n)}/r]

P = Annuity amount = $2200

r= rate of interest =0.44%= 0.0044

n = time =5*4 = 20 Quarters

Hence PVA = 2200 * [{1-(1+0.0044)^(-20)}/ 0.0044]

= 2200 * [{1-0.915938)/ 0.0044]

= 2200 *19.10508

=$42031.17

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

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