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Homework answers / question archive / Question 14 Correct Mark 200 out of 200 P Flag question How much money do you need to deposit in a bank account now so that you can withdraw $10,000 every 8 years forever if the interest rate is 7% per year, and the first withdrawal is scheduled 8 years from now? Select one: a
Question 14 Correct Mark 200 out of 200 P Flag question How much money do you need to deposit in a bank account now so that you can withdraw $10,000 every 8 years forever if the interest rate is 7% per year, and the first withdrawal is scheduled 8 years from now? Select one: a. $23,372 b. $13,372 c. $13,924 d. $17,291 e. $138,332 The correct answer is: $13,924 Question 15 Correct Mark 2.00 out of 2.00
The time period is infinite for withdrawal amount of $10000 which will take place every 8 years.
Siince the time period is infinite, we will have to convert that in to annual and will have to calculate the PW
PW = (PMT * Sinking Fund Factor) / Interest Rate
PW = (10000 * (A/F, 7%, 8)) / 0.08
= (10000 * 0.09746776) / 0.08
= 974.6776 / 0.08
= 13929.97 or 13924
Option C is correct
