Question

In: Finance

How much should you start your investment with, today?








You want to have this amount at the end913
Your money will be invested this number of years14
You will withdraw this amount each year29
The rate you will earn each year is this4.6%
How much should you start your investment with, today?
A Between 500.00 and 820.00


B Between 820.00 and 870.00


C Between 870.00 and 920.00


D Between 920.00 and 1,200.00









Solutions

Expert Solution

Present value of required amount at end period=913*Present value of discounting factor(rate%,time period)

=913/1.046^14

=913*0.532790431

=486.437664

Present value of annual withdrawals=29*Present value of annuity factor(4.6%,14)

Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

=29[1-(1.046)^-14]/0.046

=29*10.1567298

=$294.545164

Hence current total value required=486.437664+294.545164

=780.98(Approx)

Hence the correct option is:

Between 500.00 and 820.00


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