Question

In: Accounting

Diana is saving for her education. She will deposit some money into a savings account today...

Diana is saving for her education. She will deposit some money into a savings account today and in addition, deposit $500 per month for the next 2 years (24 deposits) starting one month from now. Her goal is to have enough money in the account so that she can withdraw $3,000 per month for 4 years (48 withdrawals) while she attends college and still have $8,000 left at the end for a trip to South America to celebrate her graduation. Her first withdrawal will be exactly 2 years from now when she starts college. Assume the account earns 3% compounded monthly during the entire 6 years.

How much does Diana need to deposit today? ANSWER: (in 2 decimal places),

To solve this problem, you will be creating a table with the following format.

B/E

P/Y

C/Y

N

I/Y

PV

PMT

FV

A=?

B=?

C=?

Type the value of A below.

Type the value of B below.

Type the value of C below.

Solutions

Expert Solution

Month 72 Intt rate = 0.25 100.25
Month End End balance Withdrawal Deposit in Current Month Net = deposit - withdrawal Interest Opening value
73 8000.0 0 0 19.95 7980.05
72 7980.0 3000 0 -3000 27.38 10952.67
71 10952.7 3000 0 -3000 34.79 13917.87
70 13917.9 3000 0 -3000 42.19 16875.68
69 16875.7 3000 0 -3000 49.57 19826.12
68 19826.1 3000 0 -3000 56.92 22769.20
67 22769.2 3000 0 -3000 64.26 25704.93
66 25704.9 3000 0 -3000 71.58 28633.35
65 28633.4 3000 0 -3000 78.89 31554.46
64 31554.5 3000 0 -3000 86.17 34468.29
63 34468.3 3000 0 -3000 93.44 37374.86
62 37374.9 3000 0 -3000 100.69 40274.17
61 40274.2 3000 0 -3000 107.92 43166.26
60 43166.3 3000 0 -3000 115.13 46051.13
59 46051.1 3000 0 -3000 122.32 48928.81
58 48928.8 3000 0 -3000 129.50 51799.31
57 51799.3 3000 0 -3000 136.66 54662.65
56 54662.7 3000 0 -3000 143.80 57518.85
55 57518.9 3000 0 -3000 150.92 60367.93
54 60367.9 3000 0 -3000 158.02 63209.91
53 63209.9 3000 0 -3000 165.11 66044.80
52 66044.8 3000 0 -3000 172.18 68872.62
51 68872.6 3000 0 -3000 179.23 71693.38
50 71693.4 3000 0 -3000 186.27 74507.11
49 74507.1 3000 0 -3000 193.28 77313.83
48 77313.8 3000 0 -3000 200.28 80113.55
47 80113.5 3000 0 -3000 207.27 82906.28
46 82906.3 3000 0 -3000 214.23 85692.05
45 85692.0 3000 0 -3000 221.18 88470.87
44 88470.9 3000 0 -3000 228.11 91242.77
43 91242.8 3000 0 -3000 235.02 94007.75
42 94007.7 3000 0 -3000 241.91 96765.83
41 96765.8 3000 0 -3000 248.79 99517.04
40 99517.0 3000 0 -3000 255.65 102261.39
39 102261.4 3000 0 -3000 262.50 104998.89
38 104998.9 3000 0 -3000 269.32 107729.56
37 107729.6 3000 0 -3000 276.13 110453.43
36 110453.4 3000 0 -3000 282.93 113170.50
35 113170.5 3000 0 -3000 289.70 115880.80
34 115880.8 3000 0 -3000 296.46 118584.34
33 118584.3 3000 0 -3000 303.20 121281.14
32 121281.1 3000 0 -3000 309.93 123971.21
31 123971.2 3000 0 -3000 316.64 126654.57
30 126654.6 3000 0 -3000 323.33 129331.25
29 129331.2 3000 0 -3000 330.00 132001.24
28 132001.2 3000 0 -3000 336.66 134664.58
27 134664.6 3000 0 -3000 343.30 137321.28
26 137321.3 3000 0 -3000 349.93 139971.35
25 139971.4 3000 0 -3000 356.54 142614.81
24 142614.8 500 500 356.54 141758.28
23 141758.3 500 500 353.51 141404.76
22 141404.8

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