Beginning three months from now you want to be able to withdraw $3 500 each quarter from your bank

QUESTION

Beginning three months from now, you
want to be able to withdraw $3,500 each quarter from your bank
account to cover college expenses over the next four years

Required:

If the account pays .75 percent
interest per quarter, how much do you need to have in your bank
account today to meet your expense needs over the next four years?
(Enter rounded answer as directed, but do
not use rounded numbers in intermediate calculations.
Round your answer to 2 decimal places (e.g.,
32.16).)
Solution: Given Amount required in quarter interval 3500 Quarterly interest rate = 0.75% No. of periods = 16 (4 years * 4 quarters) Amount deposited today to meet the quarterly withdrawal requirement of 3500 for 16 quarter would be = 3500 /(1+0.75%)^1 + 3500 /(1+0.75%)^2 + 3500 /(1+0.75%)^3 + 3500 /(1+0.75%)^4 + 3500 /(1+0.75%)^5 + 3500 /(1+0.75%)^6 +

500 /(1+0.75%)^7 + 3500 /(1+0.75%)^8 + 3500 /(1+0.75%)^9 + 3500 /(1+0.75%)^10 + 3500 /(1+0.75%)^11 + 3500 /(1+0.75%)^12 + 3500 /(1+0.75%)^13 + 3500 /(1+0.75%)^14 + 3500 /(1+0.75%)^15 + 3500 /(1+0.75%)^16 Therefore amount to be deposited = 52,585.09

ANSWER:

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