Geri Ginger deposits $A today in a fund paying interest at j₂ = 8%.She withdraws $500 six months from now and each succeeding semi-annual withdrawal is 10% higher.Withdrawals continue for 10 years in total.What is A? (Answer to nearest dollar)

Question

Quizplus · Accepted Answer

The problem involves calculating the present value of a geometric series of withdrawals. The first withdrawal is $500, and each subsequent withdrawal increases by 10%. The interest rate is 8% compounded semi-annually, which is 4% per period. The present value of these withdrawals over 10 years (20 periods) is calculated using the formula for the present value of a growing annuity. Solving this gives approximately $17,253.

Geri Ginger Deposits $A Today in a Fund Paying Interest