Determine the future value of a $75,000 initial deposit and $400 withdrawals at the start of each month of five years, given an interest rate of 9.9% compounded quarterly.

Question

Quizplus · Accepted Answer

This problem involves calculating the future value of an investment with both an initial deposit and regular withdrawals. The future value (FV) of the investment can be calculated using the formula for the future value of an annuity due (since withdrawals are at the start of each period) combined with the future value of a lump sum for the initial deposit. However, given the complexity of the calculation, especially with the interest compounded quarterly and monthly withdrawals, it's not straightforward to calculate without a financial calculator or specific software. The correct answer would typically involve calculating the future value of the initial deposit using the compound interest formula and then separately calculating the future value of the annuity due (the regular withdrawals) and subtracting it from the future value of the initial deposit. Since the exact calculation steps are not provided, it's important to use a financial calculator or software to accurately determine the future value considering the given interest rate, compounding frequency, and withdrawal schedule. The correct answer, based on the options provided and assuming the calculation accounts for the compounding interest and the impact of the withdrawals correctly, is $91,218.42. This suggests a scenario where the initial deposit grows over time, but the regular withdrawals reduce the future value to the stated amount.

Determine the Future Value of a $75,000 Initial Deposit and $400