Manuel deposits $35,000 into an investment account earning 3.9% interest compounded annually. The purpose of this deposit is for Manuel to withdraw $700 per month as an allowance during his 4 years of university. In addition, he wishes to have some money left in the account after the 4-year time period. Using the financial functions on the calculator, determine the amount of remaining after his education is completed.
A) $8,285.45
B) $7,890.56
C) $6,244.12
D) $5,125.84
E) $4,538.38

Question

Quizplus · Accepted Answer

To solve this problem, we can use the formula for the future value of an annuity to find out how much money will be left after the withdrawals, and then apply the compound interest formula to account for the interest earned on the initial deposit. However, the exact calculation requires the use of financial functions on a calculator, specifically the PV (Present Value), PMT (Payment), n (number of periods), and i (interest rate) functions for annuities and compound interest calculations. Given the complexity and the need for a financial calculator or software, the answer provided directly reflects the outcome of such calculations, assuming correct inputs based on the given information: an initial deposit of $35,000, a 3.9% annual interest rate, monthly withdrawals of $700 over 4 years (48 months), and the interest being compounded annually. The correct answer, therefore, is based on the result of these calculations, which indicate that option E is the amount remaining after the specified period and transactions.

Manuel Deposits $35,000 into an Investment Account Earning 3