Carl puts $10, 000 into a bank account that pays an annual effective interest rate of 4% for ten years. If a withdrawal is made during the first five and one-half years, a penalty of 5% of the withdrawal amount is made. Carl withdraws K at the end of each of years 4, 5, 6, and 7. The balance in the amount at the end of year 10 is 10, 000. Calculate K.

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16 March, 09:48

Carl puts $10, 000 into a bank account that pays an annual effective interest rate of 4% for ten years. If a withdrawal is made during the first five and one-half years, a penalty of 5% of the withdrawal amount is made. Carl withdraws K at the end of each of years 4, 5, 6, and 7. The balance in the amount at the end of year 10 is 10, 000. Calculate K.

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Talon Bullock · Answer 1

K=$980

Explanation:

10,000 * (1.04) ^10=1.05K (1.04^6+1.04^5) + K (1.04^4+1.04^3) + 10,000

K=14,802-10,000/1.05 (1.04^6+1.04^5) + 1.04^4+1.04^3

K=4,802.4/4.91=$980