Question

ou were left $100,000 in a trust fund set up by your grandfather. The fund pays 6.5% interest. You must spend the money on your college education, and you must withdraw the money in 4 equal installments, beginning immediately. How much could you withdraw today and at the beginning of each of the next 3 years and end up with zero in the account

Answer 1

$27,408.71

Step-by-step explanation:

The question requires us to find the amount of annual withdrawals that can be made out of the investment. Thus use the time value of money techniques to find the missing parameter of payment (pmt)

PV = $100,000

i = 6.5%

n = 4

p/yr = 1

FV = $0

PMT = ?

Thus, the annual withdrawals that can be made out of the investment is $27,408.71