Question

You just received a $46000 bonus check! You deposit it in an account which earns 6.25% compounded annually.  

a. How many full withdrawals of $11500 at the end of each year can be made?
full withdrawals


b. What is the amount of the smaller concluding withdrawal at the end of the next year?

Answer 1

Here we will calculate a Payment Schedule qith detail payment :

Interest = Opening Balance * Annual Rate

Closing Balance = ( Opening Balance - Closing Balance) + Interest

Here we will stop the process until the closing balance becomes less than the amount 11,500.

Here in year 04 Closing Balance become 8128.75.

So No  of full withdrawals of $11500 at the end of each year can be made = 04 (Ans a)

Amount of Smaller at 05th Year = Closing Balance + Interest = 8128.75. + 508.05 = 8636.80

Ans b :  the amount of the smaller concluding withdrawal at the end of the next year = 8636.80