Question

PV with Ordinary Annuity. Beginning three months from now, you want to be able to withdraw $2,100 cach quarter from your bank account to cover college expenses over the next four years. If the account pays.45 percent interest per quarter, how much do you need to have in your bank account today to meet your expense needs over the next four years?

Answer 1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

B D A 1 2 PMT 3 N 4 1/Y 5 6 PV 7 Quarterly withdrawal amount No. of withdrawal in 4 years Quarterly interest rate $2,100.00 16 0.45% Present Account balance $32,348.77

Cell reference -

В A 1 2 PMT 3 N 4 1/4 5 6 PV Quarterly withdrawal amount No. of withdrawal in 4 years Quarterly interest rate 2100 =4*4 0.0045 Present Account balance =PV(C4,C3,-C2,0)

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.