Question

How much must you deposit at the end of each of the next 14 years so that beginning fifteen years from now, you can withdraw $10,000 a year for the next six years (periods 15 through 20)? Assume an interest rate of 6% compounded annually.

a. $2,112.62

b. $3,512.37

c. $2,855.09

d. $2,339.90

e. $3,333.33

Answer #1

**The amount is computed as follows:**

**Present value of $ 10,000 a year in year 14 will be as
follows:**

**Present value = Annual amount x [ (1 – 1 / (1 +
r) ^{n}) / r ]**

= $ 10,000 x [ (1 - 1 / (1 + 0.06)^{6} ) / 0.06 ]

= $ 10,000 x 4.917324326

= $ 49,173.24326

Now the above value will become the future value as follows:

**Future value = Annual amount x [ [ (1 + r) ^{n} –
1 ] / r ]**

$ 49,173.24326 = Annual amount x [ [ (1 + 0.06)^{14} - 1
] / 0.06 ]

$ 49,173.24326 = Annual amount x 21.01506593

Annual amount = $ 49,173.24326 / 21.01506593

**Annual amount = $ 2,339.90**

**Feel free to ask in case of any query relating to this
question **

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***Please use financial calculator and write down the
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