Question

Suppose an individual makes an initial investment of $2,400 in an account that earns 7.2%, compounded monthly, and makes additional contributions of $100 at the end of each month for a period of 12 years. After these 12 years, this individual wants to make withdrawals at the end of each month for the next 5 years (so that the account balance will be reduced to $0). (Round your answers to the nearest cent.) (a) How much is in the account after the last deposit is made? (b) How much was deposited? (c) What is the amount of each withdrawal? (d) What is the total amount withdrawn?

Answer 1

rate positively ..

Ans a)	FV of lumsum deposit
	Put in calculator
	PV		-2400
	PMT		0
	I	7.2%/12	0.60%
	N	12*12	144
	Compute FV		$5,679.64
	Computation of future value of annuity
	Put in calculator
	PV		0
	PMT		-100
	I	7.2%/12	0.60%
	N	12*12	144
	Compute FV		$22,775.25
	Therefore amount in account after last deposit = 5679.64+22775.25							$28,454.88
Ans b)	Total amount deposited = 12000+100*144					26,400.00
Ans c)	Put in the calculator
	FV		0
	PV		($22,775.25)
	I	7.2%/12	0.60%
	N	5*12	60
	Compute PMT		$453.13
	ans =		$453.13
Ans d)	Total amount of withdrawal = 453.13*60=				$27,187.76