Question

Suppose an individual makes an initial investment of $1,800 in an account that earns 6.6%, compounded monthly, and makes additional contributions of $100 at the end of each month for a period of 12 years. After these 12 years, this individual wants to make withdrawals at the end of each month for the next 5 years (so that the account balance will be reduced to $0). (Round your answers to the nearest cent.)

(a) How much is in the account after the last deposit is made?
$  

(b) How much was deposited?
$   

(c) What is the amount of each withdrawal?
$  

(d) What is the total amount withdrawn?
$

Answer 1

(a) Amount after the last deposit is made

Use the formula of Future value in excel

where

rate= 6.6%/12

nper= 12*12 years

pmt= $100

pv= $1800

type= 0 for at the end of the month

so the amount that will be in account after last deposit will be $25839

(b) How much was deposited?

Initial Investment =    $1800

Additional Contribution(12*12*100) = $14400

Total amount deposited= $16200

(c) amount of each withdrawal

Here for the calculation of withdrawal use formula of PMT in excel

Where,

rate= 6.6%/12

nper= 5*12 years

pv= $25838.56

fv = 0

(d) Total amount withdrawn

Total Amount withdrawn = $506.77*5*12

Total Amount withdrawn = $30406.34

I hope this clear your doubt.

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