Troy Long wishes to deposit a single sum of money into a savings account so that five equal annual. withdrawals of $2000 can be made before depleting the funds. If the first withdrawal is made in year 1 after the deposit and if the bank provides an interest rate of 5% per year, how much money should be deposited now? What if Troy decides to withdraw all that he has deposited in the bank now, 5 years later, how much money should he expect to get with an interest rate of 5%? Draw the cash flow diagram.

Troy Long wishes to deposit a single sum of money into a savings account so that five equal annual. withdrawals of $2000 can be made before depleting the funds. If the first withdrawal is made in year 1 after the deposit and if the bank provides an interest rate of 5% per year, how much money should be deposited now? What if Troy decides to withdraw all that he has deposited in the bank now, 5 years later, how much money should he expect to get with an interest rate of 5%? Draw the cash flow diagram.

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

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Question

Troy Long wishes to deposit a single sum of money into a savings account so that five equal annual
withdrawals of $2000 can be made before depleting the funds. If the first withdrawal is made in
year 1 after the deposit and if the bank provides an interest rate of 5% per year, how much money
should be deposited now? What if Troy decides to withdraw all that he has deposited in the bank
now, 5 years later, how much money should he expect to get with an interest rate of 5%? Draw the
cash flow diagram.
2.

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