Recent sales of some real estate and record profits make it possible for a manuf
ID: 2800361 • Letter: R
Question
Recent sales of some real estate and record profits make it possible for a manufacturer to set aside $600,000 in a fund to be used for modernization and remodeling. How much can be withdrawn from this fund at the beginning of each half-year for the next 6 years if the fund earns 6.7%, compounded semiannually? (a) Decide whether the problem relates to an ordinary annuity or an annuity due ordinary annuity annuity due (b) Solve the problem. (Round your answer to the nearest cent.) Need Help? Read It t -/1 points HarMathAp11 6.4.043. My Notes Ask Your Teache Suppose an individual makes an initial investment of $1200 in an account that earns 8.4%, compounded monthly, and makes additional contributions of $100 at the end of each month for a period of 12 years. After these 12 years, this individual wants to make withdrawals at the end of each month for the next 5 years (so that the account balance will be reduced to $0). (Round your answers to the nearest cent.) (a) How much is in the account after the last deposit is made? (b) How much was deposited? (c) What is the amount of each withdrawal? (d) What is the total amount withdrawn?Explanation / Answer
1 a) It is a case of annuity due as the payments are made at the beginning of the period.
b) Payment can be calculated using PMT function with BEGIN mode on a calculator
N = 6 x 2 = 12, I/Y = 6.7%/2, PV = 600,000, FV = 0 => Compute PMT = $59,548.62
2) a) With END mode,
N = 12 x 12, I/Y = 8.4%/12, PV = 1200, PMT = 100 => Compute FV = $27,998.18
b) Total Deposit = 1200 + 100 x 12 x 12 = $15,600
c) Withdrawal can be calculated using PMT function
N = 5 x 12, I/Y = 8.4%/12, PV = 27,998.18, FV = 0 => Compute PMT = $573.08
d) Total Withdrawal = 5 x 12 x 573.08 = $34,384.63
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