Question

You need to cover payments on a health plan. Hence, starting 3 months from today, you want to draw $3,400 each quarter from your money market account over the next four years. If the account pays .56 percent interest per quarter, how much do you need to have in your money market account today to meet your expense needs over the next four years?

Answer 1

Periodic quarterly withdrawal is $3400

Calculating the Present Value you need to have in your money market account today:-

Where, C= Periodic Payments = $3400

r = Periodic Interest rate = 0.56%

n= no of periods = 4 years*4 = 16

Present Value = $51,895.30

So, the amount   you need to have in your money market account today is $51,895.30

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