Respuesta :
If David wants to withdraw $32,635.15 every year from his account at the end if each year for 30 years, he has to have $783243.6 in the bank account .
Define the term present annuity?
- The amount of money that would be required today to finance a series consecutive future annuity payments is referred to as the annuity's present value.
- sum of money received now is worth more than a similar sum at a later time due to the time value of money.
We would use the equation for calculating present annuity.
It is written as
PV = R[1 - (1 + r)^- n]
In which.
- The investment's present value is represented by PV.
- R stands for the consistent payments made (also weekly, monthly)
- The expression r stands for interest rate/interval payments.
- A total number of repayments is indicated by the number n.
Considering the data provided,
r = 1.5/100 = 0.015
n = 30 years
R = $32,635.15
Put the values in the formula,
PV = 32635.15[1 - (1 + 0.015)⁻³⁰]/0.015
PV = 32635.15[1 - (1.015)⁻³⁰]/0.015
PV = 32635.15(1 - 0.64)/0.015
PV = 32635.15 × 24
PV = $783243.6
Thus, amount David must have in the bank presently is $783243.6.
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