Question

Jake's parents were able to save $60,000 for his college tuition by the time jake graduated from high school. jake is trying to determine if he needs to work part time to make up any differences in his tuition over the next four years. he is currently estimating that tuition will be $18,000 per year, and he can earn eight percent on the balances remaining at the end of each year. how much will jake be able to withdraw each year for his college tuition if he withdraws an equal amount each year for four years? (use exhibit 1-d and round your answer to the nearest dollar amount.)

Answer 1

$16,773.36

Step-by-step explanation:

this is an annuity due since Jake will need to withdraw money at the beginning of the year, not the end of the year:

principal = $60,000

n = 4 distributions

interest rate = 8%

annual withdrawal = principal / annuity due factor (PV, 8%, 4 periods)

annual withdrawal = $60,000 / 3.5771 = $16,773.36