QUESTION 1 Hermann hospital has 20000 in an account earning

QUESTION 1 Hermann hospital has $20,000 in an account earning 8 percent annually, what constant amount could they withdraw each year and have nothing remaining at the end of 5 years?

Solution

Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

20000=Annuity[1-(1.08)^-5]/0.08

20000=Annuity*3.992710037

Annuity=20000/3.992710037

=$5009.13(Approx).