Ashanti wants to be able to take out $4000 per year for the next 15 years from a bank account he has today. This bank account earns 4% per year. How much has to be in the account today for Ashanti to be able to do this? (Round to the nearest $10)


how would i approach this problem?

Ok, so if you have x dollars in your account and it grows at 4% annually, then in 15 years it will be

x * (1 + .04) ^15

you want this to equal 4000, so solve that equation with logs

This post was edited by zackill4 on Oct 8 2013 09:40am

nope

you're looking for the present value of annuities

given as


where
C = Cash flow per period
i = Interest rate
n = Number of payments

/e: this assumes that the first withdrawal happens 1 year after the bank account has this value.
so at time 0 the account must have the PV you find with the equation in order to make the first payout at time 1, which is one year later

This post was edited by Simens on Oct 8 2013 02:07pm

yeah, my bad, I read the question too quckly. Thought it was just asking how much put in to get 4000 after 15 years lol.

Ashanti wants to be able to take out $4000 per year for the next 15 years from a bank account he has today. This bank account earns 4% per year. How much has to be in the account today for Ashanti to be able to do this? (Round to the nearest $10)
a.
$60,000
b.
$2220
c.
$80,090
d.
$44,470
e.
None of the above



Rebecca Gladyn plans to attend graduate school in 5 years. She thinks that she will need a total of $32,000 to pay for school and she wants to save money each month to reach her goal. What type of computation should she use?
a.
Present value of a single amount
b.
Future value of a single amount
c.
Simple interest
d.
Present value of an annuity
e.
Future value of an annuity



This post was edited by Llove on Oct 8 2013 04:19pm

thanks i got them all (: