You want to be able to withdraw 800 from a savings account a

You want to be able to withdraw $800 from a savings account at the end of year 1, $900 at the end of year 2, $1,000 at the end of year 3, and so on over a total of 5 years. How muclh money must be on deposit right now, at the end of year 0, to just deplete the account after the 5 withdrawals if interest is 5% compounded annually?

Solution

Year Amt received PVF @ 5% Present value 0 0 1 0 1 800 0.952381 761.9048 2 900 0.907029 816.3265 3 1000 0.863838 863.8376 4 1100 0.822702 904.9727 5 1200 0.783526 940.2314 Present value of amount received 4287.27 Investment required to be made: $ 4287.27