Question

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?

Answer 1

Present value of annuity P = $137,639.05 (Approx)

Step-by-step explanation:

Given:

Amount withdraw A = $12,000

Number of year n = 20

Rate r = 6%

Find:

Present value of annuity P

Computation:

P = A[1-(1+r)⁻ⁿ]/r

P = 12,000[1-(1.06)⁻²⁰]/0.06

P = 12,000 x 11.46992122

P = 137,639.05 (Approx)

Present value of annuity P = $137,639.05 (Approx)