Ed Sloan wants to withdraw $25,000 (including principal) from an investment fund

Question

Ed Sloan wants to withdraw $25,000 (including principal) from an investment fund at the end of each year for five years. How should he compute his required initial investment at the beginning of the first year if the fund earns 10% compounded annually?
a. $25,000 times the future value of a 5-year, 10% ordinary annuity
of 1.
b. $25,000 divided by the future value of a 5-year, 10% ordinary
annuity of 1.
c. $25,000 times the present value of a 5-year, 10% ordinary annuity
of 1.
d. $25,000 divided by the present value of a 5-year,10% ordinary
annuity of 1.

Explanation / Answer

d. $25,000 divided by the present value of a 5-year,10% ordinary annuity of 1.

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