Question

You estimate that it will take five years to complete your college education. Your parents want to invest enough money today at 12 per cent to enable you to withdraw $5000 at the end of each year for the next five years with nothing left at the end of the five-year period. How much money do they need today?

Answer 1

the present value is $18,025

Explanation:

The computation of the amount that should be needed today is given below:

Given that

NPER = 5

RATE = 12%

PMT = $5,000

FV = $0

The formula is shown below:

=-PV(RATE,NPER,PMT,FV)

AFter applying the above formula, the present value is $18,025