Question

How much do you have to deposit today so that, beginning 11 years from now, you can withdraw $9,000 a year for the next 8 years (periods 11 through 18) plus an additional amount of $18,000 in the last year (period 18)? Assume an interest rate of 6%.

Answer 1

Discount rate	6.0000%
Cash flows	Year	Discounted CF= cash flows/(1+rate)^year	Cumulative cash flow
9,000.000	0	9,000.00	9,000.00
9,000.000	1	8,490.57	17,490.57
9,000.000	2	8,009.97	25,500.53
9,000.000	3	7,556.57	33,057.11
9,000.000	4	7,128.84	40,185.95
9,000.000	5	6,725.32	46,911.27
9,000.000	6	6,344.64	53,255.92
9,000.000	7	5,985.51	59,241.43
18,000.000	7	11,971.03	71,212.46

value after 11 years = 71,212.46

amount to be deposited today = 71,212.46/1.06^11 = 37,513.84