It is your 6^th birthday today.You have a trust fund with $50,000 that is earning 8% per year.You expect to withdraw $30,000 per year for 7 years starting on your 22^nd birthday for graduate school.How much money will be left in the trust fund after your last withdrawal (rounded to the nearest $10)?

Question

Quizplus · Accepted Answer

The total amount you will withdraw over 7 years is $30,000 x 7 = $210,000. 
Using the formula for future value of an annuity: 
FV = PMT x [(1 + r)^n - 1]/r 
where PMT is the withdrawal amount, r is the interest rate, and n is the number of periods, we can calculate the future value of the remaining trust fund after 7 years: 
FV = $20,000 x [(1 + 0.08)^7 - 1]/0.08 = $152,140 
Subtracting the total amount withdrawn from the original trust fund, we get: 
$50,000 + $152,140 - $210,000 = $-7,860 
This means that you will not have enough money to complete your graduate school payments, so the answer is D.

It Is Your 6th Birthday Today

It Is Your 6^th Birthday Today