Question

Stacy Monroe wants to create a fund today that will enable her to withdraw $35,000 per year for 6 years, with the first withdrawal to take place 4 years from today. Click here to view factor tables If the fund earns 15% interest, how much must Stacy invest today? (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 458,581.)

Answer 1

Answer:

She must invest $75732.63

Explanation:

Well firstly we look at the problem in 4 years time and start calculating the present value in four years.

using a financial calculator

n= 6, I= 15% , PMT = cash withdrawals = $35000, Fv = 0 pv =132456.89

that we take that Present value in four years make it future value in current year

Fv = 132456.89, with same data and compute new present value= 75732.63