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.
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How much would have to be deposited in a savings account earning 6%,so that equal annual withdrawals of $200 can be made at the end of each of ten years? The balance at the end of the last year would be zero.
A)$528
B)$1,472
C)$2,000
D)$2,636

Question

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.  
-
How much would have to be deposited in a savings account earning 6%,so that equal annual withdrawals of $200 can be made at the end of each of ten years? The balance at the end of the last year would be zero.
A)$528
B)$1,472
C)$2,000
D)$2,636

Quizplus · Accepted Answer

The problem involves calculating the present value of an annuity. Using the present value of annuity formula or table for 6% over 10 years, you find the present value factor and multiply it by the annual withdrawal amount ($200) to find the initial deposit needed.

The Solution to This Problem Requires Time Value of Money