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John wishes to set up an account for his grandfather so that he can have some extra money each month. John wants his grandfather to be able to withdraw $190 per month for the next 3 years. How much must
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John wishes to set up an account for his grandfather so that he can have some extra money each month. John wants his grandfather to be able to withdraw $190 per month for the next 3 years. How much must John invest today at 3% per year compounded monthly so that his grandfather can withdraw $190 per month for the next 3 years?

User Hudson Buddy
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1 Answer

2 votes

Answer:

$6,533

Step-by-step explanation:

The amount to be withdrawn monthly = $190 (PMT)

n = 3 years = 36 months

i/r = 3%/year = 0.25% / month

Future Value (FV) at year 3 = 0

Input these data into a financial calculator/Excel will generate the following:

Present value (PV) = $6,533

John should invest $6,533 today

User Chris Edgington
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4.3k points
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