Question

9. You want to be able to withdraw the specified amount periodically from a payout annuity with the given terms. Find how much the account needs to hold to make this possible. Round your answer to the nearest dollar.Regular withdrawal:$4500Interest rate:4.5%FrequencyquarterlyTime:24 yearsAccount balance: $

Answer 1

For P = 4500, r = 0.045 and n = 96, we have:

$\frac{P\lbrack1-(1+r)^{-n}\rbrack}{r}=\frac{4500\lbrack(1-(1+0.045)^{-96})\rbrack}{0.045}=98538$

Therefore, the account needs to hold $98,538 to make this possible.