2059% us. Wed 8:42 marks People Window Help yvcu ttps:/edugen.wileyplus.com/edug

Question

2059% us. Wed 8:42 marks People Window Help yvcu ttps:/edugen.wileyplus.com/edugen/iti/main.uni Options Would you ike to translate i? Nope Translate Never translate Arabic Return to Blackboard Intermediate Accounting, 16e CALCULATOR BACK Brief Exercise 6-12 | Pearl Alvarez is investing $379,900 in a fund that earns 10% interest compounded annually. | emethstan Pean with drowatthe end of each ofthe next 16 years, ( a nd of each of the next 16 years? (Round factor values to 5 decimal places, e.g. 1.25124 and answers to 0 decimal places, e.g. 458,581.) Yearly wiahdrawals Question Attempts: o of 3 used SAVE FOR LATERSUBMET A

Explanation / Answer

Solution:

The question is related to the ordinary annuity and time value of money.

Present Value of Investment = $379,900

Ordinary Annuity is a series of payment or receipt of an equal amount for a specified period of time.

Time period (n) given is = 16 years

Rate of Interest = 10%

It means the Yearly Withdrawals is a series of receipt of equal amount

Specified Period = 16

Present Value of Ordinary Annuity = $379,900

Or Present Value of Ordinary Annuity = Yearly Withdrawals x (1 – (1/(1+R)n) / R

(1 – (1/(1+R)n) / R = PV Annuity factor

= (1 – (1 / (1+0.10)16) / 0.10

= 7.82371

Hence,

Yearly Withdrawal amount = Present Value of Ordinary Annuity $379,900 / PV Annuity factor 7.82371

= $48,558

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