A donation of $250,000 is made today to the local library for the purchase of new books. What amount can be withdrawn every month in perpetuity if the money is earning 9% compounded monthly and the first payment is to be made immediately?

Question

Quizplus · Accepted Answer

The correct answer can be found using the formula for the perpetuity immediate withdrawal: $PMT = PV \times \frac{i}{n}$, where PMT is the monthly payment, PV is the present value ($250,000), i is the annual interest rate (9% or 0.09), and n is the number of compounding periods per year (12 for monthly). Plugging in the values: $PMT = 250,000 \times \frac{0.09}{12} = 1,861.04$.

A Donation of $250,000 Is Made Today to the Local