Google has just purchased your website that reviews GPS systems. You made a profit of $65,000. You would like to invest the $65,000 into an account that pays you an annual compounded interest rate of 5.5%. You want to make annual withdrawals over the next 10 years such that by the end of this 10 year period, the amount remaining in the account will be zero dollars. Determine, from the given information, the amount of the annual withdrawals. Round your answer to the nearest cent.
a.$6,500
b.$7,023.45
c.$7,251.31
d.$8,623.40

Hi there
The formula of the present value of annuity ordinary is
Pv=pmt [(1-(1+r)^(-n))÷r]
So we need to solve for pmt (the amount of the annual withdrawals)
PMT=pv÷ [(1-(1+r)^(-n))÷r]
Pv present value 65000
R interest rate 0.055
N time 10 years
PMT=65,000÷((1−(1+0.055)^(
−10))÷(0.055))
=8,623.40....answer

Hope it helps

Answer Link

azikennamdi azikennamdi · Answer 2 · 2022-05-20T12:31:24+02:00

This exercise relates to the calculation of the Present Value of Annuity. The amount of withdrawals that was made to the nearest cent is: 8,623.40 (Option D)

What is Present Value of Annuity?

The Present Value of Annuity is the present value or worth of any future payment from an annuity subject to a specific rate of return (also known as Discount Rate).

High discount rates provide a lower present value of the annuity.

What are the steps are arriving at the annual withdrawals?

The formula is:

PV = PMT [(1-(1+r) ^ (-n)) ÷ r]

Recall that what we are looking for is PMT that is, the amount of the annual withdrawals.

Hence we rework the equation to read:

PMT = PV/ [(1-(1+r) ^ (-n))/r]

Since we have the following values:

PV = $65,000

R = 0.055 and

N = 10 years,

Therefore,

PMT = 65,000/ ((1−(1+0.055)^(−10))/(0.055))

= 8623.40496572

to the nearest cent, this will give us:

PMT = 8623.40

Learn more about Present Value of Annuity at:

https://brainly.com/question/25792915

#SPJ2