Question

Suppose you have savings of $6,697 in a bank account that pays monthly compound interest of 1.4%. You expect towithdraw $338 per month for 9 months from your account, with the first withdrawal starting a month from now. If there are no other deposits or withdrawals, how much money will be left in your account right after your 9^th withdrawal? Round your answer to the nearest $1, i.e., round to a whole number.

Answer 1

- Amount of saving in acount today = $6,697

Calculating the Future Value of account saving at the end of 9 months by assuming that no withdrawals and deposit take place in account except for initial balance:-

Future Value = Invested Amount*(1+r)^n

Where,

r = Periodic Interest rate = 1.4%/12 = 0.116666%

n= no of periods = 9 months

Future Value = $6,697*(1+0.00116666)^9

Future Value = $6,697*1.01054913356

Future Value of Initial amount at the end of 9 months = $6767.65

- You will withdraw periodicly each month for 9 months at the end of each amounting $338

Calculating the future Value at the end of 9 months of periodic withdrawal:-

Where, C= Periodic Withdrawal = $338

r = Periodic Interest rate = 1.4%/12 = 0.116666%

n= no of periods = 9 months

Future value of periodic withdrawal at the end of 9 months = $3,056.23

Money left in account after 9 months = Future Value of Initial amount at the end of 9 months - Future value of periodic withdrawal at the end of 9 months

= $6767.65 - $3056.23

Money left in account after 9 months = $3711