J.K. Toweling has decided to leave her job in order to write her first novel. She...

J.K. Toweling has decided to leave her job in order to write her first novel. She will finance this through her savings of $70,000 which are in a bank account that pays her 4.8% p.a. compounding monthly. At the end of each month, she will withdraw $3,000 from this account to cover her living expenses. If it is expected to take her 15 months to complete the novel, how much will she have left in her bank account just after that final withdrawal of $3,000?

Solutions

Expert Solution

The amount left after the 15th withdrawal will be the
difference of the following two amounts:
1] FV of the dposit of 70000 [as if no withdrawal is made] = 70000*1.004^15 =	$ 74,319.66
2] FV of the 15 monthly withdrawals [annuity] = 3000(1.004^15-1)/(0.0041.004^15) =	$ 43,592.06
Balance in the account after the final withdrawal = 74319.66-43592.06 =	$ 30,727.60

jeff jeffy answered 2 years ago

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