Explanation Given: The present value, time and interest rate are; P V = $ 35 , 650 t = 4 years r = 2.54 % Here, P V is the present value, t is the time and r is the rate of interest. Formula Used: The expression of the interest rate per period is; i = r m Here, i is the interest rate per time period, r is the interest rate and m is the number of time periods per year or month. The expression for present value for amount deposited per period is; P V = P M T [ ( 1 + i ) n − 1 i ] Here, P V is the present value, n is the time period and P M T is the payment at the end of each period. Calculation: Let’s calculate amount of each withdrawal as; Provided rate of interest is 2.54 % , convert it into decimal as 2.54 % = 0.0254 and Interest is compounded monthly, so period is 12 as number of months in a year is twelve. Recall the expression of the interest rate per period. i = r m Substitute 0.0254 for r and 12 for m . i = 0.0254 12 = 0.00212 Also, Time is four years and interest is compounded monthly. So, number of periods is 4 × 12 = 48 n = 48 Recall the expression of present value for amount deposited per period

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ISBN: 9780134776323

Author: MULLINS

Publisher: PEARSON CUSTOM PUB.(CONSIGNMENT)

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