The solution to this problem requires time value of money calculations.Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations.
How much would have to be deposited in a savings account earning 6%, so that equal annual withdrawals of $200 can be made at the end of each of 10 years? The balance at the end of the last year would be zero.
A) $528
B) $1,472
C) $2,000
D) $2,636

Question

The solution to this problem requires time value of money calculations.Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. ​
How much would have to be deposited in a savings account earning 6%, so that equal annual withdrawals of $200 can be made at the end of each of 10 years? The balance at the end of the last year would be zero.
A) $528
B) $1,472
C) $2,000
D) $2,636

Quizplus · Accepted Answer

To find the present value of an annuity, you use the present value of annuity factor from the tables. For 10 years at 6%, the factor is approximately 7.3601. Multiply this factor by the annual withdrawal amount ($200) to find the initial deposit needed: $200 * 7.3601 = $1,472.02, which rounds to $1,472.

The Solution to This Problem Requires Time Value of Money