The trustees of a college have accepted a gift of $250000 but are required to deposit...
The trustees of a college have accepted a gift of $250000 but are required to deposit it in an account paying 6% per year, compounded semiannually. They may make equal withdrawals at the end of each six-month period, but the money must last 4 years.
a. Find the amount of each withdrawal.
b. Find the amount of each withdrawal if the money must last 6 years.
Homework Answers
Present Value = $250,000
Interest Rate = 6% semi-annually
a.
Time Period = 4 years
Calculating Semi-Annual Withdrawal,
PMT = [FV = 0, PV = 250,000, T = 8, I = 0.06/2]
Semi-Annual Withdrawal = $35,614.10
b.
Time Period = 6 years,
Calculating Semi-Annual Withdrawal,
PMT = [FV = 0, PV = 250,000, T = 12, I = 0.06/2]
Semi-Annual Withdrawal = $25,115.52
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