Solution: The Amount to be Invest today is $5,589
Amount to Invest Today | |||
Years | Withdraw | Present Value Factor @6% | Present Value |
1 | $ 600 | 0.9434 | $ 566 |
2 | $ 600 | 0.8900 | $ 534 |
3 | $ 600 | 0.8396 | $ 504 |
4 | $ 600 | 0.7921 | $ 475 |
5 | $ 600 | 0.7473 | $ 448 |
6 | $ 600 | 0.7050 | $ 423 |
7 | $ 600 | 0.6651 | $ 399 |
8 | $ 600 | 0.6274 | $ 376 |
9 | $ 600 | 0.5919 | $ 355 |
10 | $ 2,700 | 0.5584 | $ 1,508 |
$ 5,589 |
Note:
1) The Amount to be Invest today is nothing but present value of future withdrawal.
2) Below table is the total calculation of flow of cash in 10 Years
Total Calculation | |||||
Years | Account bal(A) | Interest Rate(B) | Interest (C=A*B) | Withdraw (D) | Balance (A+C+D) |
0 | $ 5,589 | 0% | $ - | 0 | $ 5,589 |
1 | $ 5,589 | 6% | $ 335 | $ 600 | $ 5,324 |
2 | $ 5,324 | 6% | $ 319 | $ 600 | $ 5,044 |
3 | $ 5,044 | 6% | $ 303 | $ 600 | $ 4,746 |
4 | $ 4,746 | 6% | $ 285 | $ 600 | $ 4,431 |
5 | $ 4,431 | 6% | $ 266 | $ 600 | $ 4,097 |
6 | $ 4,097 | 6% | $ 246 | $ 600 | $ 3,743 |
7 | $ 3,743 | 6% | $ 225 | $ 600 | $ 3,367 |
8 | $ 3,367 | 6% | $ 202 | $ 600 | $ 2,970 |
9 | $ 2,970 | 6% | $ 178 | $ 600 | $ 2,548 |
10 | $ 2,548 | 6% | $ 153 | $ 2,700 | $ 1 |
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