You need $20,000 annually for 4 years to complete your education, starting next

Question

You need $20,000 annually for 4 years to complete your education, starting next year. (You would withdraw the first $20,000 one year from today.) Your uncle will deposit an amount today in a bank paying 6% annual interest, which would provide the needed $20,000 payments.
a.How large must the deposit be?
b. How much will be in the account immediately after you make the first withdrawal?

*Can whomever who decides to help me on this problem tell me how this is computed into my financial calculator? Thanks!!

Explanation / Answer

Annual rate is 6% = r n = 1,2,3,4 You'll have to withdraw 20,000 after 1 year so discount that by (1+r)^n [n =1 here] Next year, another 20,000 discounted by (1+r)^2 Following year, 20,000 discounted by (1+r)^3 And the last year, 20,000 discounted by (1+r)^4 So the discounted payments are respectively $18,867.92; $17,799.93; $16792.39; $15841.87 which totals to $69,302.11 which your uncle would need to initially deposit. So if you have a calculator, just plug in: 20000/((1.06)^1) 20000/((1.06)^2) 20000/((1.06)^3) 20000/((1.06)^4) And add those four numbers together.

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