Given below are the present value factors for $1.00 discounted at 10% for one to five periods. Each of the items 52 to 55 is based on 10% interest compounded annually.
-What amount should an individual have in a bank account today before withdrawal if $5,000 is needed each year for four years with the first withdrawal to be made today and each subsequent withdrawal at one-year intervals? (The balance in the bank account should be zero after the fourth withdrawal.)
A)$5,000 + ($5,000 × 0.909) + ($5,000 × 0.826) + ($5,000 × 0.751)
B)$5,000 ÷ 0.683 × 4
C)($5,000 × 0.909) + ($5,000 × 0.826) + ($5,000 × 0.751) + ($5,000 × 0.683)
D)$5,000 ÷ 0.909 × 4

Question

Given below are the present value factors for $1.00 discounted at 10% for one to five periods. Each of the items 52 to 55 is based on 10% interest compounded annually. 
-What amount should an individual have in a bank account today before withdrawal if $5,000 is needed each year for four years with the first withdrawal to be made today and each subsequent withdrawal at one-year intervals? (The balance in the bank account should be zero after the fourth withdrawal.)
A)$5,000 + ($5,000 × 0.909) + ($5,000 × 0.826) + ($5,000 × 0.751) 
B)$5,000 ÷ 0.683 × 4 
C)($5,000 × 0.909) + ($5,000 × 0.826) + ($5,000 × 0.751) + ($5,000 × 0.683) 
D)$5,000 ÷ 0.909 × 4

Quizplus · Accepted Answer

The first withdrawal is made today, so $5,000 is needed immediately. The subsequent withdrawals are discounted to present value using the given factors for each year.

Given Below Are the Present Value Factors for $1