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Beginning three months from now, you want to be able to withdraw $2,

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Beginning three months from now, you want to be able to
withdraw $2,900 each quarter from your bank account to
cover college expenses over the next five years. If the
account pays .51 percent interest per quarter, how much
do you need to have in your bank account today to meet
your expense needs over the next five years?
Beginning three months from now, you want to be able to
withdraw $2,900 each quarter from your bank account to
cover college expenses over the next five years. If the
account pays .51 percent interest per quarter, how much
do you need to have in your bank account today to meet
your expense needs over the next five years?
Solution
The cash flows are simply an annuity with four payments
(since its quarterly) for five years or 20 payments we can
use the PVA equation
Annuity amount= $ 2900, Rate(r)= 0.51%, Time(n)= 5
years (or 20 quarters )
PVA= annuity amount × [1 - (1 / (1 + r)n)] / r
PVA= $ 2900 x[ 1-{ 1/(1+0.0051)20)]/0.0051
PVA= $ 55,006.94

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Beginning three months from now, you want to be able to withdraw $2,900 each quarter from your bank account to cover college expenses over the next five years. If the account pays .51 percent interest per quarter, how much do you need to have in your bank account today to meet your expense needs over the next five years? Beginning three months from now, you want to be able to withdraw $2,900 each quarter from your bank account to cover college expenses over the next five years. If the account pays .51 percent interest per quarter, how much do you need to have in your bank account today to meet ...
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