17. (Ignore income taxes in this problem.) If you wanted to withdraw $12,000 from a bank account at the end of each of the next

Question

3 years ago

9

17. (Ignore income taxes in this problem.) If you wanted to withdraw $12,000 from a bank account at the end of each of the next

20 years, approximately how much would you have to invest in the account today assuming a 6% interest rate?
a. $20,924
b. $38,462
c. $74,880
d. $137,604

Mathematics

1 answer:

Rufina [12.5K] · Answer 1 · 2022-01-16T15:55:03+03:00

Answer:

d. $137,604

Step-by-step explanation:

The amortization formula is good for this. It tells you the principal P that must be invested to support payments of A each year for t years when the interest rate is r:

P = A(1 -(1 +r)^-t)/r

P = $12,000(1 -1.06^-20)/0.06 ≈ $137,639.05

The closest answer choice is $137,604.