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

Economics Dec 05, 2020

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

Expert Solution

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

Archived Solution

Unlocked Solution

You have full access to this solution. To save a copy with all formatting and attachments, use the button below.

Already a member? Sign In

Important Note: This solution is from our archive and has been purchased by others. Submitting it as-is may trigger plagiarism detection. Use it for reference only.

For ready-to-submit work, please order a fresh solution below.

Or get 100% fresh solution

Get Custom Quote