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expeople1 [14]
3 years ago
14

You have saved​ $120,000 for your child to attend college. If it is in an account earning an annual rate of​ 8%, how much can yo

u take out in equal payments at the end of each of the next four years to pay for their​ education?
Business
1 answer:
harkovskaia [24]3 years ago
3 0

Answer:

I will take $36,230.5 to pay for the education of child.

Explanation:

Cash Invested in the saving account will earn a return of 8% each year and this amount could be withdrawn by the me to pay for the education of child.

We will use following formula to calculate the annual payments

P = r ( PV ) /  [ 1 - ( 1+ r )^-n ]

where

PV = amount of investment = $120,000

r = rate of return = 8%

n = number of period = 4 years

P = 8% ( 120,000 ) / [ 1 - ( 1 + 0.08 )^-4 ]

P = 36,230.5

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