Question

Ms Wong wants to establish a savings fund from which a Light & Love Home charitable organization
in British Columbia could draw $30,000 at the beginning of each year for 30 years. If the account earns
6%, what amount does Ms Wong have to deposit now to achieve this noble goal? (Show your
calculations)

Answer 1

Information provided:

Yearly withdraw= $30,000

Time= 30 years

Interest rate= 6%

The question is concerning finding the present value of annuity due. Annuity due refers to annuity that occurs at the beginning of a period.

This can also be solved using a financial calculator by inputting the below into the calculator:

The financial calculator is set in the end mode.  Annuity due is calculated by setting the calculator to the beginning mode (BGN). To do this, press 2^ndBGN 2^ndSET on the Texas BA II Plus calculator.

Enter the below in a financial calculator to compute the present value of annuity due:

PMT= 30,000

N= 30

I/Y= 6

Press the CPT key and PV to calculate the present value.

The value obtained is 437,721.63.

Therefore, Ms.Wong has to deposit $437,721.63 now to achieve the goal.