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You were left $100,000 in a trust fund set up by your grandfather. The fund pays 6.5% interest. You must spend the money on your college education, and you must withdraw the money in 4 equal installments, beginning immediately. How much could you withdraw today and at the beginning of each of the next 3 years and end up with zero in the account

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ogbe2k3

Answer:

The answer is 27,408.71

Explanation:

Solution

Recall that:

You were left with a trust fund of =$100,00

Interest rate = 6.5%

Money with drawled = 4 installments

Now,

The step to take is to find you could withdraw currently at the start of each of the next 3 years with a zero account to end up with.

Now,

100, 00 = X (1 - (1.065)^-4/.065/1.065

We now solve for X

Thus

X =7,408.71

By applying or using a financial calculator

We arrange it to an annuity due setting - [2nd] [BGN] then [2nd] [Set] this will set it to mode "BGN"

So,

N = 4

I/Y = 6.5

PV = -100,000

FV = 0

CPT PMT

The payments are known to to be 27,408.71

Note : Kindly find an attached copy of the Financial calculator below

Ver imagen ogbe2k3
anthougo

The amount you can withdraw is $29,190.27 per installment.

Data and Calculations:

Amount in trust fund = $100,000

Interest rate on the fund = 6.5%

Number of equal instalments to withdraw = 4

N (# of periods) = 4

I/Y (Interest per year) = 6.5%

PV (Present Value) = $100,000

FV (Future Value) = $0

Schedule of Withdrawals:

Period          PV                        PMT                 Interest          Future Value

1          $100,000.00          $-29,190.27        $6,500.00          $77,309.73

2            $77,309.73          $-29,190.27         $5,025.13          $53,144.58

3            $53,144.58          $-29,190.27         $3,454.40          $27,408.71

4            $27,408.71          $-29,190.27           $1,781.57          $0.00

Results:

PMT = $29,190.27

Sum of all periodic payments = $116,761.10

Total Interest = $16,761.10

Thus, the amount to withdraw per installment is $29,190.27.

Learn more about periodic payments or withdrawals here: https://brainly.com/question/16970802

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