Question

On your birthday, when you turned 24, $25400 was deposited in an account which earns 10.5%...

On your birthday, when you turned 24, $25400 was deposited in an account which earns 10.5% compounded annually.

a.  How much can you withdraw annually for 11 years if the first withdrawal is made on the day you become 49?


b.  State the total amount of interest earned on this account.

Homework Answers

Answer #1

We have to find the future value of the deposit for the next 25 years (from 24 to 49)

Future value=Present value*(1+interest rate)^n

interest rate=10.5%

n=25

Accumulated value after 25 years=$25,400*((1+10.5%)^25)=$308,241.2

The interest earned in first part=$308,241.2-$25,400=$282,841.2

a. ==> For annual withdrawals, use PMT function in EXCEL

=PMT(rate,nper,pv,fv,type)

rate=10.5%

nper=number of years=11

pv=$308,241.2

fv=0

type=1 (because withdrawls happens in the begining of the each year)

=PMT(10.5%,11,-308,241.2,0,1)

PMT=Annual withdrawls=$43,941.72

In second part the total interest earned=(11*$43,941.72)-$308,241.2=$483,358.9-$308,241.2=$175,117.7

b. Find the total interest earned by adding $282,841.2+$175,117.7=$457,958.93

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
On your birthday, when you turned 20, $12100 was deposited in an account which earns 10.5%...
On your birthday, when you turned 20, $12100 was deposited in an account which earns 10.5% compounded annually. a. How much can you withdraw annually for 16 years if the first withdrawal is made on the day you become 45? $ b. State the total amount of interest earned on this account. $
$300 is deposited in an account which earns 4% compounded quarterly for 6.75 years. (a) State...
$300 is deposited in an account which earns 4% compounded quarterly for 6.75 years. (a) State the value of the account at the end of the 6.75 years. $   (b) State the total amount of interest earned on the account during the 6.75 years. $
Assume that you saved $641,000 in a retirement account. The money is deposited in an account...
Assume that you saved $641,000 in a retirement account. The money is deposited in an account that earns 5% interest compounded Weekly. You want to retire and begin making weekly withdrawals from the account such that the money (principal and interest) lasts exactly 23 years. What is the amount of the weekly withdrawal?
Your uncle deposited $5,000 into an account for you when you were born, $5,000 more when...
Your uncle deposited $5,000 into an account for you when you were born, $5,000 more when you turned six, and $5,000 more when you turned twelve. How much will be in the account on your 21st birthday if interest rates are 6%?
Henry Quincy wants to withdraw $30,000 each year for 15 years from a fund that earns...
Henry Quincy wants to withdraw $30,000 each year for 15 years from a fund that earns 12% interest. How much must he invest today if the first withdrawal is at year-end? How much must he invest today if the first withdrawal takes place immediately? A. First withdrawal at year-end B. First withdrawal immediately Pearl Alvarez is investing $385,400 in a fund that earns 11% interest compounded annually. What equal amounts can Pearl withdraw at the end of each of the...
Your grandmother deposited $1,000 into an account for you when you were born, and on each...
Your grandmother deposited $1,000 into an account for you when you were born, and on each birthday ever since. Interest rates are 4%. (8 pt.s) How much will be in the account on your 21st birthday? If your grandmother forgot to make a deposit when you turned 16, how much will be in the account when you turn 21? If a $100 zero coupon bond is sold with a 6 month maturity and a 3.5% yield, how much would it...
Suppose Justin have deposited $10,000 in your high-yield saving account today. The savings account pays an...
Suppose Justin have deposited $10,000 in your high-yield saving account today. The savings account pays an annual interest rate of 4%, compounded semi-annually. Three years from today Justin will withdraw X dollars. You will continue to make additional withdraws of X dollars every 6 months, until you have a zero balance after your last withdrawal 6 years from now. Find X.
You are retiring and you have $300000 save in your retirement account today. The account earns...
You are retiring and you have $300000 save in your retirement account today. The account earns interest at an annual rate of 12%. You are considering several alternatives for your payments. Determine the payment amount under each of the following circumstances: a) Your payments are received annually for the next 20 years and interest is compounded annually: b) Your payments are received semi- annually for the next 20 years and interest is compounded semi- annually: c) Your payments are received...
Your mother deposited $50,000 into a savings account for your retirement. the account will compound interest...
Your mother deposited $50,000 into a savings account for your retirement. the account will compound interest at 5% annually. you will not be able to withdraw any money from the account until you retire in 40 years. Which of the following is correct? A. The interest you earn 6 years from now will equal the interest you earn 10 years from now. B. The present value of this investment is equal to $50,000. C. The interest amount you earn will...
A person deposits $45 at the end of each month in an account which earns 12.5%...
A person deposits $45 at the end of each month in an account which earns 12.5% compounded monthly for 29 years. The person then stops making the deposits, but allows the money to remain in the bank earning the same interest for 15 more years. a. Find the value of this account at the end of 44 years. $   b. State the total amount of interest earned on this account.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT