Suppose you have deposited $10,000 in your high-yield saving account today. The savings account pays an...

Suppose you have deposited $10,000 in your high-yield saving account today. The savings account pays an annual interest rate of 4%, compounded semi-annually. Three years from today you will withdraw R dollars. You will continue to make additional withdraws of R dollars every 6 months, until you have a zero balance after your last withdrawal 6 years from now. Find R.

Solutions

Expert Solution

Value of deposit on completion of 3 years= $11,261.62 as follows:

First withdrawal being on completion of 3 years from now (6 half years), and the last one on completion of 6 years (12 half years), the withdrawals constitute an annuity due comprising 7 half yearly cash flows, with present value (in 3 years from now at $11,261.62

Amount that can be withdrawn every half year (Value of R)= $1,705.94 as follows:

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

1) Suppose you deposited $10,000 into a savings account today. The account pays a nominal annual...

1) Suppose you deposited $10,000 into a savings account today. The account pays a nominal annual interest rate of 12%, but interest is compounded quarterly. Assuming that you make no additional deposits into or withdrawals from the account, what will your ending balance be 10 years from today? 2) A firm expects to pay dividends at the end of each of the next four years of $2.00, $2.50, $2.50, and $3.50. If growth is then expected to be constant at 8...

Suppose Evan deposited $10,000 into a savings account today. The account pays a nominal annual interest...

Suppose Evan deposited $10,000 into a savings account today. The account pays a nominal annual interest rate of 12%, but interest is compounded quarterly. Assuming that he makes no additional deposits into or withdrawals from the account, what will his ending balance be 10 years from today?

An amount of $10,000 is deposited into a savings account that pays interest at a rate...

An amount of $10,000 is deposited into a savings account that pays interest at a rate of 7%. If 10 equal annual withdrawals are made from the account starting one year after the money was deposited, how much can be withdrawn so that in the fifth year one would be able to withdraw an additional $1,000 and the account would be depleted after 10 years? Explain verbally in detail and sketch a timeline to illustrate.

Suppose you deposited $10,000 in a savings account earning 3.9% interest compounding daily. How long will...

Suppose you deposited $10,000 in a savings account earning 3.9% interest compounding daily. How long will it take for the balance to grow to $21,000? Answer in years rounded to one decimal place.

if $175 is deposited at the end of each year in a saving account that pays...

if $175 is deposited at the end of each year in a saving account that pays 6% interest per year , approximately how much money will be in the account at the end of 10 years

On January 1, $5000 is deposited into a high-interest savings account that pays 8% interest compounded annually.

On January 1, $5000 is deposited into a high-interest savings account that pays 8% interest compounded annually. If all the money is withdrawn in 5 equal end-of-year sums beginning December 31 of the first year, how much will each withdrawal be?

Suppose you have $10,000 in a savings account that earns 4% interest. Further, suppose you were...

Suppose you have $10,000 in a savings account that earns 4% interest. Further, suppose you were to take all $10,000 out and start a business. After a year you sell the business for $15,000 a- What is the accounting profit you made on the sale of this business? b-What is the economic profit you made on the sale of this business?

Please show cash flow diagram and steps a) Today you deposited $1,000 in a savings account...

Please show cash flow diagram and steps a) Today you deposited $1,000 in a savings account paying 5% annual interest. How much should you have at the end of three years? b) You are paying into a mutual fund that earns 6%. If the payments are $10,000 per year, how much will be in the funds in 15 years? c) Your company is required to pay into a sinking fund each year in order to replace an industrial equipment costing...

You recently inherited $10,000 and deposited the money today in an investment account paying 8% compounded...

You recently inherited $10,000 and deposited the money today in an investment account paying 8% compounded annually. Inheriting this money has motivated you to plan for the future and you have decided that you would like to have $250,000 in the bank 15 years from today. To achieve this goal, in addition to the money you have already deposited in the investment account, you plan to deposit an equal amount of money in the account each year for the next...

$1200 is deposited into a saving account that pays 6% effective montly interest rate what is...

$1200 is deposited into a saving account that pays 6% effective montly interest rate what is the amount of interest earned in the final quarter of the 8th year?

Subjects