Find the present value of a decreasing annuity necessary to fund withdrawals of $2,500 per quarter for 20 years, if the annuity earns 4% per year. (Assume end-of-period deposits and compounding at the same intervals as deposits). Round your answer to the nearest cent.
A) $P V = \$ 137,220.52$
B) $P V = \$ 175,298.95$
C) $P V = \$ 75,500.91$
D) $P V = \$ 45,113.88$
E) $P V = \$ 75,501.91$

Question

Find the present value of a decreasing annuity necessary to fund withdrawals of $2,500 per quarter for 20 years, if the annuity earns 4% per year. (Assume end-of-period deposits and compounding at the same intervals as deposits). Round your answer to the nearest cent.  
A) $P V = \$ 137,220.52$
B) $P V = \$ 175,298.95$
C) $P V = \$ 75,500.91$
D) $P V = \$ 45,113.88$
E) $P V = \$ 75,501.91$

Quizplus · Accepted Answer

The present value of a decreasing annuity can be calculated using the formula for the present value of an annuity due to the withdrawals happening at the end of each period. Given the quarterly withdrawals of $2,500 for 20 years at an annual interest rate of 4%, compounded quarterly, the correct calculation leads to the present value of approximately $137,220.52, making option A the correct answer.

Find the Present Value of a Decreasing Annuity Necessary to Fund