Question

You want to be able to withdraw the specified amount periodically from a payout annuity with...

You want to be able to withdraw the specified amount periodically from a payout annuity with the given terms. Find how much the account needs to hold to make this possible. Round your answer to the nearest dollar.

Regular withdrawal: $1200
Interest rate: 2%
Frequency monthly
Time: 27 years



Account balance: $

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Homework Answers

Answer #1

Information provided:

Monthly withdrawal= $1,200

Interest rate= 2%/12= 0.1667% per month

Time= 27 years*12= 324 months

The question is solved by computing the present value.

Enter the below in a financial calculator to compute the present value:

PMT= 1,200

I/Y= 0.1667

N= 324

Press the CPT key and PV to compute the present value.

The value obtained is 300,232.62.

Therefore, the account balance is $300,232.62.

In case of any query, kindly comment on the solution.

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