Question

What is the amount of six equal annual deposits that can provide ten annual withdrawals, where a first withdrawal of $17223 is made at the end of year seven and subsequent withdrawals increase at $846 over the previous year, at an interest rate of 5% compounded annually? Enter you answer as follows: 12345 Round your answer. Do not use a dollar sign ("$"), any commas() or a decimal point ("")

Answer 1

1. Finding PV of All Withdrawals

7		17223	12,240.06
8		18069	12,229.81
9		18915	12,192.78
10		19761	12,131.54
11		20607	12,048.49
12		21453	11,945.83
13		22299	11,825.64
14		23145	11,689.80
15		23991	11,540.08
16		24837	11,378.12
		PV of All Withdrawals	1,19,222.14

Next: PV of All Deposits= x/(1.05)*1 + x/(1.05)^2 + .... and so on

This yields PV of all deposits= x(1-0.7452)/(1-0.9523) = 5.3417x
Now, 5.3417x= 119222.14

which yields x= 22319.14