Question

Your parents want to place money in an account so that you can withdraw $200 a...

Your parents want to place money in an account so that you can withdraw $200 a week for the next four years while you finish college and graduate school. If they place the money in an account that earns 4% interest, compounded weekly, how much do they need to place in the account so that the funds will be depleted in four years? (Assume that you will make the first withdrawal one week from today.)

Please elaborate on your reasoning for the numbers

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Answer #1

Ans:- This is the case of the Present Value of an annuity. we will use the PV function of excel to find the answer.

For PV Rate=4%/52 (since the rate is compounded weekly), Nper=52*4, Pmt=-$200, FV=0.

Note:- There are 52 weeks in a year.

Therefore, the parents needs to deposit $38,428.99 i.e $38,429 (approx).

Note:- If this answer helps you pls give thumbs up.

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