Question

# To complete your last year in business school and then go through law school, you will...

To complete your last year in business school and then go through law school, you will need \$30,000 per year for 4 years, starting next year (that is, you will need to withdraw the first \$30,000 one year from today). Your uncle offers to put you through school, and he will deposit in a bank paying 3.73% interest a sum of money that is sufficient to provide the 4 payments of \$30,000 each. His deposit will be made today. How large must the deposit be? Round your answer to the nearest cent. \$ How much will be in the account immediately after you make the first withdrawal? Round your answer to the nearest cent. \$ How much will be in the account immediately after you make the last withdrawal? Round your answer to the nearest cent. Enter "0" if required \$

P.V OF ANNUITY = CASH FLOW * [ 1-(1+R)-N] /R

=30000 [ 1-(1+0.0373)-4] /0.03

=30000 [ 1- 0.8637] /0.03

=30000 [ 1- 0.8637] /0.03

=30000( 0.1362/0.03)

=30000*4.542

=136261.0818

APPROX 136261 IS THE AMOUNT TO BE INVESTED

TOTAL AMOUNT TO BE DEPOSTED =136261

AMOUNT OF INTEREST ARISE AT THE END OF 1ST YEAR=136261*(1+r)N

=136261*(1+0.0373)1

=136261*0.0373

=5082

AMOUNT TO BE PAID AT THE END OF FIRST YEAR=30000

AMOUNT EARNED IN THE FORM OF INTERES=5082

PRINCIPAL WITHDRAWN FROM=30000-5082=24918

AMOUNT IN BANK AT THE END OF 1ST YEAR =136261-(30000-5082)

=136261-(24918)

=111343

AMOUNT IN BANK AT THE END OF 1ST YEAR =111343

AMOUNT AFTER 4TH YEAR WILL BE ZERO

#### Earn Coins

Coins can be redeemed for fabulous gifts.