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Homework answers / question archive / A woman wins $10,000 in a competition
A woman wins $10,000 in a competition. This amount is placed in a trust fund earning 8% annually. She wants to take the money in 4 equal annual payments with the first payment to be made 6 years from now. What would be the size of each annual payment? *
Present value of the fund= 10000
Value of the fund after 5 years= FV=PV*(1+r)^n
= 10000*(1+8%)^5
= 10000*1.469328077
= 14693.28
Using the formula PV of annuity= Annuity*(1-1/(1+rate)^number of terms)/rate
14693.28= A*(1-1/(1+8%)^4)/8%
14693.28= A*3.31212684
A= 14693.28/3.31212684
A= 4436.206918
Size of each annual payment= $4436.21
