SOLUTION: Please help!
Find the present value PV of the annuity necessary to fund withdrawals of $100 per month for 20 years, if the annuity earns 2% per year (assume monthly compounding)
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-> SOLUTION: Please help!
Find the present value PV of the annuity necessary to fund withdrawals of $100 per month for 20 years, if the annuity earns 2% per year (assume monthly compounding)
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Question 1071791: Please help!
Find the present value PV of the annuity necessary to fund withdrawals of $100 per month for 20 years, if the annuity earns 2% per year (assume monthly compounding).
Thank you Answer by Theo(13342) (Show Source):
you would enter:
present value = 0
future value = 0
paymnt = 200
interest rate percent = 2/12 = .1666667 per month
number of months = 12 * 20 = 240
you would select payment at end of time period.
you would click on pv and you would get pv = 39,534.79 as shown in the following picture.
disregard the sign.
it has to do with cash flows in or out.
the pv is a cash flow out because you take your money and put it into the annuity fund.
the payment is positive because you are receiving money from the annuity fund.
a key point is that you need to determine the interest rate per time period and the number time periods.
your time periods are in month because the payments are monthly and the interest rate compounding is monthly.
you take the annual percentage rate and divide it by 12 to get the interest rate percent per month.
you take the number of year and multiply them by 12 to get the number of months.
the calculator does the rest.
there are formulas involved so that you can do the work manually by using the formula.
