How much would you have to invest today to be able to withdraw $6,814 each month,...

How much would you have to invest today to be able to withdraw $6,814 each month, for 6 months, starting 9 months from now, if your investments earn 5.37% APR (compounded monthly)?

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Expert Solution

PV of Annuity(8 months from now) = Monthly Withdrawal * [{1 - (1 + r)^-n} / r]

= $6,814 * [{1 - (1 + 0.0537/12)^-6} / (0.0537/12)]

= $6,814 * [0.0264/0.0045]

= $6,814 * 5.9071

= $40,251.22

PV of Annuity now = PV of Annuity(8 months from now) / (1 + r)ⁿ

= $40,251.22 / [1 + (0.0537/12)]⁸

= $40,251.22 / 1.0364

= $38,838.82

jeff jeffy answered 2 years ago

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