The solution to this problem requires time value of money calculations. Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. Denise wants to help pay for her niece's college tuition. Her niece will begin college in one year. How much would Denise need to put into a savings account today at 6% so that her niece can withdraw $10,000 per year for 4 years, and reduce the account balance to zero at the end of the 4 years?
A) $34,650
B) $37,720
C) $37,600
D) $31,680

Question

Quizplus · Accepted Answer

The future value of the withdrawals is $40,000. The present value of the withdrawals at 6% for 4 years is $34,650.

The Solution to This Problem Requires Time Value of Money