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Mr. Gonzales has made beginning-of-year deposits into an investment account for the past 21 years. Each...

Mr. Gonzales has made beginning-of-year deposits into an investment account for the past 21 years. Each deposit was $5500, and the account earned interest at a rate of 4.5% APR, compounded quarterly, each year. Having made his last deposit one year ago, he now plans to transfer all of the accumulated funds today into a money-market account that earns an APR of 1.50% compounded quarterly. If he plans to withdraw $4000 from the account at the end of each quarter for the next 9 years (36 quarters), what will be the account balance total exactly nine years from now, immediately after he makes the last quarterly withdrawal?

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Answer #1

The total value of the beginning-of-year deposits today is to be found out. Using a excel function FV

Value of the deposits today = $770,888.10

Now, we have to calculate future value after 9 years with the amount invested at 1.5% per annum and quarterly $4000 withdrawal

Hence, the account balance after 9 years = $728222.68

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