Carl puts $10, 000 into a bank account that pays an annual effective interest rate of 4% for ten years. If a withdrawal is made during the first five and one-half years, a penalty of 5% of the withdrawal amount is made. Carl withdraws K at the end of each of years 4, 5, 6, and 7. The balance in the amount at the end of year 10 is 10, 000. Calculate K.

Question

Yusuf

Business

18 March, 23:13

Carl puts $10, 000 into a bank account that pays an annual effective interest rate of 4% for ten years. If a withdrawal is made during the first five and one-half years, a penalty of 5% of the withdrawal amount is made. Carl withdraws K at the end of each of years 4, 5, 6, and 7. The balance in the amount at the end of year 10 is 10, 000. Calculate K.

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Rachael Mayer · Answer 1

K=$980

Explanation:

10,000 * (1.04) ^10=1.05K (1.04^6+1.04^5) + K (1.04^4+1.04^3) + 10,000

K=14,802-10,000/1.05 (1.04^6+1.04^5) + 1.04^4+1.04^3

K=4,802.4/4.91=$980