Question

Find the amount necessary to fund the given withdrawals. Yearly withdrawals of $1250 for 12 years; interest rate is 5.7%, compounded annually. The amount necessary to fund the given withdrawals is 5 (Round to the nearest cent as needed.)

Answer 1

To find the amount necessary to fund the given withdrawals, we can use the formula for compound interest. The principal amount required is $14,919.24 (rounded to the nearest cent).

Step-by-step explanation:

To find the amount necessary to fund the given withdrawals, we can use the formula for compound interest. The formula is A = P(1 + r)^n, where A is the total future amount, P is the principal (initial amount), r is the interest rate per period, and n is the number of periods. In this case, the yearly withdrawals are $1250 for 12 years, the interest rate is 5.7% compounded annually. We need to find the principal amount required to fund these withdrawals.

First, let's find the total future amount. Using the given formula, A = 1250 × (1 + 0.057)^12 = $25,286.41.

Now, to find the principal amount, we can rearrange the formula as P = A / (1 + r)^n. Substituting the values, P = $25,286.41 / (1 + 0.057)^12 = $14,919.24. Therefore, the amount necessary to fund the given withdrawals is $14,919.24 (rounded to the nearest cent).