If you have $20,000 in an account earning 8% annually, what constant amount could you withdraw each year and have nothing remaining at the end of five years?
A) $3,525.62
B) $5,008.76
C) $3,408.88
D) $2,465.78

Question

Quizplus · Accepted Answer

To find the constant withdrawal amount, use the formula for the annuity payment: P = [r*PV] / [1 - (1 + r)^-n], where P is the payment, r is the interest rate, PV is the present value, and n is the number of periods. Plugging in the values: P = [0.08*20000] / [1 - (1 + 0.08)^-5] = $5,008.76.

If You Have $20,000 in an Account Earning 8% Annually