Question

Beginning three months from now, you want to be able to withdraw $3,300 each quarter from your bank account to cover college expenses over the next four years.

If the account pays .73 percent interest per quarter, how much do you need to have in your bank account today to meet your expense needs over the next four years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Amount needed            $

Answer 1

In this quation we will find out the present value of the annuity.

here interest rate per quarter = 0.73%

quarterly payment = $3300

and total payment term =4 years =16 quarters

so we will use excel formual PV(rate,nper,pmt) to solve the present value of this annuity

here rate =0.73%

nper = 16

pmt= -3300 (since you have to withdraw the value)

so present value PV(0.73%,16,-3300) = $49,662.43

henceyou should now have $49,662.43 in your account to meet future needs

Thanks