Sally deposits $10,200 today in a fund earning interest at j₂ = 6%.She wishes to withdraw $600 every 6 months for as long as possible,with the first withdrawal made today.Including the withdrawal made today,how many full withdrawals of $600 would she be able to make? A)22 B)23 C)24 D)25

Question

Quizplus · Accepted Answer

Sally can make 23 full withdrawals of $600. The first withdrawal reduces her initial deposit to $9600. Using the formula for the present value of an annuity (PVA = PMT * [(1 - (1 + r)^-n) / r]), where PMT is the payment amount ($600), r is the semi-annual interest rate (3% or 0.03, since the annual rate is 6%), and n is the number of periods. Solving for n gives us the total number of withdrawals, including the first one.

Sally Deposits $10,200 Today in a Fund Earning Interest at J2

Sally Deposits $10,200 Today in a Fund Earning Interest at J₂