Question

Derek wants to withdraw $11,575.00 from his account 3.00 years from today and $13,908.00 from his account 12.00 years from today. He currently has $2,838.00 in the account. How much must he deposit each year for the next 12.0 years? Assume a 6.69% interest rate. His account must equal zero by year 12.0 but may be negative prior to that. Currency: Round to: 2 decimal places.

Answer 1

- Derek wants to withdraw $11,575.00 from his account 3.00 years from today and $13,908.00 from his account 12.00 years from today

Calculating the Present Value of these wihdrawals:-

where, r = Interest rate = 6.69%

Present Value = $9531.25 + $6394.11

Present Value today = $15,925.36

- Derek currently have $2838 in account.

Remaining amount Derek need to contribute each year for 12 years = $15,925.36 - $2838

= $13,087.36

Now, Calculating the Annual deposit each year for 12 years:-

Where, C= Periodic Deposits

r = Periodic Interest rate = 6.69%

n= no of periods = 12

Present Value = $13,087.36

C = $1620.61

So, the amount of deposit each year for the next 12.0 years is $1620.61