Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Can someone please help me to solve the following question showing all work and formulas neatly. And please show the cash flow diagram as well. PLEASE ANS THANK YOU!!!!!
Transcribed Image Text:Q5. You wish to deposit a single sum of money in a savings account so that five equal
annual withdrawals of $6,000 can be made before depleting the fund. Suppose the first
withdrawal does not occur until 4 years after the deposit (the first withdrawal occurs at
the end of year 4) and the fund pays interest at a rate of 4% compounded annually, how
much should he deposit?
) Please show your work, your cash flow diagram, and factor value.
Expert Solution
Step 1
Present Worth:
It is the present value of future cash flows. The present worth is computed by discounting these future cash flows by an appropriate rate of interest.
Information Provided:
Interest rate = 4%
Annuity payment = $6000
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