Question

You want to deposit a sum of money today that will enable you to withdraw 15,000...

You want to deposit a sum of money today that will enable you to withdraw 15,000 a year for six years beginning one year from today if you can deposit the funds in the bank that offers a stated annual rate of 12% compounded monthly how much must you invest today

  1. $90,000
  2. $60,495
  3. $61,671
  4. $53,687
  5. None of the above are correct
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Answer #1

Ans B. $ 60495

Compounded Monthly
EAR= ( 1 + 12%/12)^12 - 1
EAR= 12.6825%
Annuity PV Factor (End of Period) = P [ 1 - ( 1 + r )^-n ]
        r
15000* ( 1 - ((1 / (1 + 12.6825%)^6)))
                                  12.6825%
7672.557546
0.126825
60495.00
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