Question

4. You have estimated that your educational expenses over the next four years will be $15,000 per year. How much money do you need in your account now in order to withdraw the required amount each year? Your account bears interest at 10 percent per year. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 You have estimated that your educational expenses over the next four years will be $15,000 per year. How much money do you need in your account now in order to withdraw the required amount each year? Your account bears interest at 10 percen per year. (Round your answer to 2 decimal places.) Amount required

Answer 1

Future Value of educational expense per annum (PA) = $15,000

Time Period (t) = 4 years

Rate of interest (r) = 10% P.A.

Present Value of future cash flow    $P = F * 1/\left ( 1+r \right )^{^{n}}$

$P = 15000 * 1/\left ( 1+.10 \right )^{^{4 }}$

P =(15000*.9090+15000*.8264+15000*.7513+15000*.683)

Or we can write P = 15000*3.17 (3.17 is present value of future constant when discount rate is 10%)

Present value = $47,550