Question

Suppose that your grandparents give you 22000 dollars today as a graduation gift, and you deposit this money into an account that will earn an effective interest rate of 7.4 percent. You plan to make annual withdrawals from the account for as long as you can, with the first withdrawal being one year from now. Each withdrawal will be 5200 dollars, except for the last one which will be a smaller amount. What will be the amount of this final smaller withdrawal?

Answer 1

We need to calulate the present Value of all withdrawls:

PV=22000
r=0.074
PMT=5200

=NPER(0.074,5200,-22000)
=5.26 years

hence we need to keep years = 5 to calculate present value

Year	Beginning value	Interest	payment	Principal repaid	End Value
1	22000	1628	5200	3572	18428
2	18428	1363.672	5200	3836.328	14591.67
3	14591.67	1079.784	5200	4120.216	10471.46
4	10471.46	774.8877	5200	4425.112	6046.343
5	6046.343	447.4294	5200	4752.571	1293.773
6	1293.773	95.73919

Ttoal payment at end= 1293.77+95.73=$1,389.51