Please help with this frustrating problem. I have talked with three different pe
ID: 2549398 • Letter: P
Question
Please help with this frustrating problem. I have talked with three different people now with three totally different answers. I am totally lost. Thanks for your help.
Ashlee wants to make 10 equal deposits from year 1 to 10 in a bank account that pays 8% interest This way, she can withdraw $11,200 each year from year 11 to 15. How much should she deposit from year 1 to 10? Click the icon to view the interest factors for discrete compounding when i-8% per year. She has to deposit SRound to the nearest dollar.) More Info Compound Present Compound Sinking PresentCapital Gradient Gradient Uniform Amount Present Worth Worth Factor P/F i, N) 0.9259 0.8573 0.7938 0.7350 0.6806 Worth Factor Factor (AF, i, N) 10000 0.4808 0.3080 0.2219 0.1705 Recovery Factor (AP, N) 1.0800 0.5608 0.3880 0.3019 0.2505 Factor (PIG, , N) i,N) 0.0000 0.4808 0.9487 1.4040 1.8465 A. iN) 1,0800 1.1664 1.2597 1.3605 1.4693 A,i,N) 0.9259 1.7833 2.5771 3.3121 3.9927 1.0000 2.0800 3.2464 0.8573 2.4450 4.6501 7.3724 2 5.8666 1.5869 17138 1.8509 1.9990 2.1589 7.3359 8.9228 10.6366 12.4876 0.1363 0.1121 0.0940 0.0801 0.0690 4.6229 5.2064 .7466 6.2469 6.7101 2.2763 2.6937 3.0985 3.4910 3.8713 10.5233 0.5835 0.5403 0.5002 0.4632 0.2163 0.1921 0.1740 0.1601 0.1490 14.0242 17.8061 21.8081 25.9768 Enter your answer in the answer box and then click Check AnswerExplanation / Answer
First we will find the present value of withdrawals of year 11 to 15 :- Using present value of annuity
Present value of annuity = P*(1-(1+r)^-n/r)
P is Periodic withdrawal is $ 11,200
Interest rate is = 8%
No of years is = 5
Present value of annuity = 11200*(1-(1+0.08)^-5/0.08)
Present value of annuity is = 11200*3.99271
Present Value of annuity is = $ 44,718.35/-
Now we need to find the deposit to be made in each year to arrive the above future value
So Future value of annuity is = P*((1+r)^n-1/r)
P is = ?
n is = 10 years
r is 8%
Future value of annuity is = 44718.35
44718.35 = P*((1+0.08)^10-1/0.08)
44718.35 = P*14.48656
P is = 3,086.89/-
So from year 1 to 10, she need to deposit 3,086.89/- per year.