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Future Value of An Ordinary Annuity(Accounting)

Accounting
Tutor: None Selected Time limit: 0 Hours

Amy Monroe wants to create a fund today that will enable her to withdraw $25,000 per year for 8 years, with the first withdrawal to take place 5 years from today. If the fund earns 8% interest, how much must Amy invest today? Round to 5 decimal place

Mar 2nd, 2015

Present Value=

PV=C( 1-(1+R)^-N)/R*(1+R) where R= Interest,N=number of payments C=cash flow per period

PV=25,000(1-(1+0.08)^-8))/0.08*(1+0.08)

PV=25,000*(0.4595/0.08)*1.08

PV=25,000*5.7437*1.08

PV=155,079.9

Mar 2nd, 2015

The answer is 105,599

Mar 2nd, 2015

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