Question
Hi, can you help on question b, is a correct? Thank you a.Today is January 1, year 1. Vivian is 20 years old today. Vivian
Hi, can you help on question b, is a correct? Thank you
a.Today is January 1, year 1. Vivian is 20 years old today. Vivian is going to put $1000 into her savings account on her 21st birthday and on every birthday after that for 20 payments (i.e., until her 40th birthday). She will earn 5%, paid annually. After she makes her final deposit, how much money will be in the account after the bank deposits her interest into the account, i.e., on January 1, year 21, the day she turns 40, after she makes her 20th payment?
Future value of ordinary annuity
FV = PMT x ((1+i)n-1)/I, FV = 1,000 x (1+0.05)20-1)/0.05 = 33,065.95
b. Calculate how much money she could take out each year for the next 20 years, from her 41st birthday till her 60th birthday, assuming she still earns 5%, takes out the same amount each year, and drains the account to exactly $0 after taking her 20th payment.
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