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.

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Amount that can be withdrawn every half year (Value of R)= $1,705.94 as follows: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

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