Given,
Interest rate = 7.3%
Amount to be withdrawn after two years indefinetly = $4000.
Present value of amount to be invested at the end of two years :-
PV = $4000/(1+0.073) + $4000/(1+0.073)2 + $4000/(1+0.073)3...........
This forms geometric profession.
Sum of geometric progression is a/1-r
a = $4000/(1+0.073)
r = 1/(1+0.073)
There fore present value is
PV = $4000/(1+0.073)/1 - (1/(1+0.073))
On solving this we get
PV = $4000/0.073
PV = $54794.
This is present value at the end of two years.
Present value as on today = $54794/(1+0.073)2
Amount to be invested as on today = $47591.
How do I work this problem out to get these answers? Thanks! How much money (in...
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