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9 January, 14:10

Mark wants to withdraw $6,500 at the end of three years and $8,000 at the end of five years. He wants to do this in such a way that the account balance drops to zero after the last withdrawal. Assuming that the interest rate is 5%, how much money should Mark deposit today to ensure that his needs are met?

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  1. 9 January, 14:24
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    The formula is

    P=A: (1+r) ^t

    A the last withdrawal is 8000

    P the remaining amount 2 years ago?

    R interest rate 0.05

    T time 2 years

    P=8,000: (1+0.05) ^ (2)

    p=7,256.2358276644 this is the remaining balance that mark invested after drawing the amount of 6500

    Add the withdrawal amount of 6500 to the remaining balance to get

    7,256.2358276644+6,500

    =13,756.235827664

    Now use the formula again to find the amount invested 5 years ago

    P=A: (1+r) ^t

    p=13,756.235827664: (1+0.05) ^ (3)

    p=11,883.15 ... answer
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