Question

Carl puts $10, 000 into a bank account that pays an annual effective interest rate of 4% for ten years. If a withdrawal is made during the first five and one-half years, a penalty of 5% of the withdrawal amount is made. Carl withdraws K at the end of each of years 4, 5, 6, and 7. The balance in the amount at the end of year 10 is 10, 000. Calculate K.

Answer 1

Answer:

K=$980

Explanation:

10,000*(1.04)^10=1.05K(1.04^6+1.04^5)+K(1.04^4+1.04^3)+10,000

K=14,802-10,000/1.05(1.04^6+1.04^5)+1.04^4+1.04^3

K=4,802.4/4.91=$980