Seth has a bank account which pays 1.01% interest, compounded quarterly. Seth withdraws $4,567 from the account every quarter for 35 years. Assuming that Seth does not make any deposits into this account and that the withdrawals occur at the end of every quarter, find the initial value of the account, rounded to the nearest cent.

a.

$765,824.68

b.

$767,758.39

c.

$538,021.66

d.

$539,380.16

Question

Business

Blondie

23 July, 16:58

Seth has a bank account which pays 1.01% interest, compounded quarterly. Seth withdraws $4,567 from the account every quarter for 35 years. Assuming that Seth does not make any deposits into this account and that the withdrawals occur at the end of every quarter, find the initial value of the account, rounded to the nearest cent.

a.

$765,824.68

b.

$767,758.39

c.

$538,021.66

d.

$539,380.16

+5

Answers (1)

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Terrell Foster · Answer 1

Pay attention and lets see the procedure given the data above:

r = 0.0101 / 4 = 0.00253

n = 35 yrs * 4 qtrs per year = 140

If this is true then we can use the formula for these cases and proceed like this:

PVoa = PMT[ (1 - (1 / (1 + r) ^n)) / n]

= 4567[1 - (1 / 1.00253^40)) / 0.00253]

= 4567[ (1 - 0.70254) / 0.00253]

= 4567[117.80636]

Answer = $538,021.66

Hope this is good for you