Question

how much needs to be invested today if your goal is to withdraw

$600 at the end of each year for the next nine years. the first payment will be at the end of this year and

$2700 ten years from today?

please explain how to solve this with financial calculator

interest rate is 6%

Answer 1

Solution: The Amount to be Invest today is $5,589

Amount to Invest Today
Years	Withdraw	Present Value Factor @6%	Present Value
1	$                 600	0.9434	$                           566
2	$                 600	0.8900	$                           534
3	$                 600	0.8396	$                           504
4	$                 600	0.7921	$                           475
5	$                 600	0.7473	$                           448
6	$                 600	0.7050	$                           423
7	$                 600	0.6651	$                           399
8	$                 600	0.6274	$                           376
9	$                 600	0.5919	$                           355
10	$             2,700	0.5584	$                       1,508
			$                       5,589

Note:

1) The Amount to be Invest today is nothing but present value of future withdrawal.

2) Below table is the total calculation of flow of cash in 10 Years

Total Calculation
Years	Account bal(A)	Interest Rate(B)	Interest (C=A*B)	Withdraw (D)	Balance (A+C+D)
0	$        5,589	0%	$                              -	0	$                   5,589
1	$        5,589	6%	$                          335	$                 600	$                   5,324
2	$        5,324	6%	$                          319	$                 600	$                   5,044
3	$        5,044	6%	$                          303	$                 600	$                   4,746
4	$        4,746	6%	$                          285	$                 600	$                   4,431
5	$        4,431	6%	$                          266	$                 600	$                   4,097
6	$        4,097	6%	$                          246	$                 600	$                   3,743
7	$        3,743	6%	$                          225	$                 600	$                   3,367
8	$        3,367	6%	$                          202	$                 600	$                   2,970
9	$        2,970	6%	$                          178	$                 600	$                   2,548
10	$        2,548	6%	$                          153	$             2,700	$                            1