You deposit $A today into a fund earning j₁ = 10%.You wish to make annual withdrawals for a total of 20 withdrawals.The first withdrawal will be $20,000 and it will be made two years from now.Each succeeding withdrawal will be 5% higher.What is the value of A? (Answer to nearest dollar)

Question

Quizplus · Accepted Answer

The problem describes a growing annuity where the first withdrawal starts in two years, and each subsequent withdrawal grows by 5% annually. The formula for the present value of a growing annuity is used here, considering the growth rate of withdrawals and the interest rate of 10%. By calculating the present value of all future withdrawals under these conditions, we find that the closest value to the calculated present value is $220,220, making option B the correct choice.

You Deposit $A Today into a Fund Earning J1 =

You Deposit $A Today into a Fund Earning J₁ =