SOLUTION: Yumi's grandparents presented her with a gift of $21,000 when she was 9 years old to be used for her college education. Over the next 8 years, until she turned 17, Yumi's parents h

Question 1202828: Yumi's grandparents presented her with a gift of $21,000 when she was 9 years old to be used for her college education. Over the next 8 years, until she turned 17, Yumi's parents had invested her money in a tax-free account that had yielded interest at the rate of 3.5%/year compounded monthly. Upon turning 17, Yumi now plans to withdraw her funds in equal annual installments over the next 4 years, starting at age 18. If the college fund is expected to earn interest at the rate of 4%/year, compounded annually, what will be the size of each installment? (Assume no interest is accrued from the point she turns 17 until she makes the first withdrawal. Round your answer to the nearest cent.)
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Answer by Theo(13342) (Show Source): You can put this solution on YOUR website!
you can use a calculator to solve this.
you can use formulas as well, but calculator is preferred unlesd your instructore forces you to use formulas.
if so, come back anf i'll give you formulas.

first find the future value of the 21000 invested when yumi was 9, until she was 17.
next find the payments required at the end of each year for the next 4 years.

future value is 27652.99
this is what she'll have when she turns 17.

the annual payment to be made at the end of each of the next 4 years at 4% per year will be equal to 7618.12

the online calculator at https://arachnoid.com/finance/

here are the results.

for the first calculation, inputs are profided for evrything except future value.

for the second calculation, the future value from the first calculation beomes the present value for the second calculation and inputs are provided for evrything except payment amount.

let me know if you have any questsions.
theo
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