Al Darby wants to withdraw $20900 (including principal) from an investment fund at the end of each year for five years. How shou

Question

3 years ago

10

ld he compute his required initial investment at the beginning of the first year if the fund earns 11% compounded annually

1 answer:

labwork [276] · Answer 1 · 2021-12-28T23:34:55+03:00

Answer:

$20,900 times the present value of a 5-year, 11% ordinary annuity of 1’

Explanation:

For computing the required initial investment we considered the following information

Withdrawn amount = $20,900

Time period = 5 years

Rate of interest = 11%

in mathematically,

= Withdrawn amount × Present value of a 5-year, 11% ordinary annuity of 1’

By this formula we can get the required initial investment