Find the amount necessary to fund the given withdrawals Quar

Find the amount necessary to fund the given withdrawals. Quarterly withdrawals of $800 for 6 years; interest rate is 6.8% compounded quarterly. The amount necessary to fund the given withdrawals is $___ (Round to the nearest cent as needed)

Solution

This problem can be viewed as the present value of an annuity with semi-annual payments of $800 for 6 years with a semi-annual interest rate of 6.8%

The math formula for the Present Value of an annuity is

Present Value of an annuity is = Payment * (1-(1+i)^-n)/i where i = 6.8/4 = 1.7 and n = 6*2 = 12

= 800( 1 - (1+0.017)^-12)/0.017

= $ 8618.27