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How much would Eli have to deposit today to be able to withdraw $ 1,200 each...

How much would Eli have to deposit today to be able to withdraw $ 1,200 each year for life if Can you earn 10% annually compounded annually on your deposit?

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Answer #1

We can answer this question using the formula for present value of perpetuity.

Given:
Cash flow = $1,200 each year
Discount rate = 10% compounded annually.

Substituting the values in the formula, we get:

Therefore, Eli would have to deposit $12,000 today to withdraw $1,200 each year for life if he can earn 10% compounded annually.

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