Question

vuestion: 1 pt 1 of 10 (2 complete) This Quiz: 10 pts possible A father wants to know "How do I invest $23.059 now so that my daughter gets S600 per month of income for the next 5 years? Calculate the answer for this dad The interest rate of this investment should be.% per month (Round to two decimal places)

Answer 1

Expected income is $600 per month for next 5 years

Total expected amount is:- 600 x 12 x 5 = $36000

Principal amount:- $23059

The interest rate is calculated monthly

The required formula is:-

Total:- Compound interest from the principal + Future value of the monthly payments

Total:- P(1+r/n)nt + [PMT × (((1 + r/n)nt - 1) / (r/n))

=> 36000 = 23059( 1 + r)60 + [ - 600 x (((1 + r)60 - 1) / (r))

After solving the equation, you will get the following result:-

(interest compounded monthly - added at the end of each month) Year Year Withdraw Year Interest Total Withdraw Total Interest Balance 1 ($6,000.00 ($6,000.00) ($6,000.00) ($6,000.00) ($6,000.00) $2,362.52 $1,929.92 $1,445.86 $904.24 $298.20 ($6,000.00) ($12,000.00) ($18,000.00) ($24,000.00) ($30,000.00) $2,362.52 $4,292.44 $5,738.30 $6,642.53 $19,421.52 $15,351.44 $10,797.30 $5,701.53 $-0.27 $6,940.73 Base amount: $23,059.00 Interest Rate: 94084% (monthly) Effective Annual Rate: 11.89% Calculation period: 5 years Regular Withdrawal Calculation

Graph 1 - Balance (Compounded Monthly) 20000.00 15000.00 dollars 10000.00 5000.00 0.00 - years Balance — Graph 2 - Total Interest (Compounded Monthly) 8000.00 6000.00 dolars 4000.00 2000.00 0.00 = 1 2 5

So the required rate of interest should be around:- .9408 % monthly