Question

How much must I deposit today if I want to be able to withdraw $620 per month for six years from an account which earns a nominal rate of three percent, compounded monthly, if withdrawals are made at the beginning of each month

Answer 1

Answer:

S=48980 shall be deposit if he or she want to withdraw 620 per month for six years from an account.

Explanation:

n=number of periods=6*12=72 periods

i=compound interest rate=3%=3/12=.0025 compounded monthly

R=regular withdraws=$620

S=Sum of Future amount=?

Formula= S=R[(1+i)∧n+1-1/i]-R

                  =620[(1+.0025)∧72+1]-1/.0025]-620

                  =620( 1.0025∧73-1/.0025)-620

                  =620[(1.19994-1)/.0025]-620

                 =620(.19994/.0025)-620

                 =49600-620

                 =48980