A family wish to make 25 regular annual withdrawals from their bank account for the next...

A family wish to make 25 regular annual withdrawals from their bank account for the next 25 years. All the withdrawals will be of the amount of $3,673. They plan to make the first withdrawal a year from now, the second one two year from now, the third one three years from now, and so on. In addition, they also wish to have $2,801 remaining balance in your account right after their 25th withdrawal. If the bank pays 6% annual compounding interest, how much money do they need to have in the account right now so that they can make all the 25 withdrawals and have $2,801 leftover as expected. Round your answer to the nearest $1, i.e., round to a whole number.

Expert Solution

Present value=Cash flows*Present value of discounting factor(rate%,time period)

=3,673/1.06+3,673/1.06^2+3,673/1.06^3+3,673/1.06^4+3,673/1.06^5+3,673/1.06^6+3,673/1.06^7+3,673/1.06^8+3,673/1.06^9+3,673/1.06^10+3,673/1.06^11+3,673/1.06^12+3,673/1.06^13+3,673/1.06^14+3,673/1.06^15+3,673/1.06^16+3,673/1.06^17+3,673/1.06^18+3,673/1.06^19+3,673/1.06^20+3,673/1.06^21+3,673/1.06^22+3,673/1.06^23+3,673/1.06^24+3,673/1.06^25+2801/1.06^25

which is equal to

=$47606(Approx)

jeff jeffy answered 2 years ago

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