Beginning three months from now, you want to be able to withdraw $1,500 each quarter from your bank account to cover college expenses over the next 4 years. The account pays 1.25 percent interest per quarter. How much do you need to have in your account today to meet your expense needs over the next 4 years?

Question

Quizplus · Accepted Answer

The correct answer is A.The future value of the withdrawals over the next 4 years is $1,500 x 4 x 4 = $24,000. The present value of this amount, discounted at 1.25% per quarter for 4 years (16 quarters), is $24,000 / (1.0125^16) = $21,630.44.

Beginning Three Months from Now, You Want to Be Able