Question

How much would a person have to deposit now to be able to withdraw $550 at the end of each year for 20 years from an account that earns 11 percent?

$3.785 95
$4 379 83
54 739 95
$5.076.55

Answer 1

Answer: $4,379.83

Step-by-step explanation:

Given the following details:

Periodic payment = $550

Interest rate = 11%

Number of periods = 20 years

Present Value (PV) = P[(1 - (1 + r)^-n) / r]

Where

P = periodic payment = $550

r = Interest rate = 11% = 0.11

n = number of periods = 20

PV = 550[(1 - (1 + 0.11)^-20) / 0.11]

PV = 550[(1 - (1.11)^-20) / 0.11]

PV = 550[(1 - 0.1240339) / 0.11]

PV = 550[0.8759660 / 0.11]

PV = 550(7.9633281)

PV = 4379.8304

PV = 4379.83