Homework Answers
The amount in the James account is found using future value of annuity equation
![Ax ((1+r)^-1] Future value of annuity=](http://img.homeworklib.com/questions/63feb0e0-ce02-11ea-9e73-9332bf9e1e16.png?x-oss-process=image/resize,w_560)
![Future value of annuity= $4500 x [(1 +0.08)30 – 1] 0.08](http://img.homeworklib.com/questions/644ddc90-ce02-11ea-9de7-41907bd22128.png?x-oss-process=image/resize,w_560)
The amount in the James account = $ 509775
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The size of the withdrawal is calculated as $ 509775.
Using the size of withdrawal and present value of annuity equation, we can find out how much the payment will be each year.
![Ax[(1 + r) - 1] Present value of annuity= - rx (1+r)](http://img.homeworklib.com/questions/64a062b0-ce02-11ea-9433-2112483cbe2a.png?x-oss-process=image/resize,w_560)
In the above equation, the value of A is the annual payment that James will receive each year.
![$509775 = A x [(1 + 0.08) 20 – 1] 0.08 x (1 +0.08) 20](http://img.homeworklib.com/questions/64f2df00-ce02-11ea-826f-c17714ccb4be.png?x-oss-process=image/resize,w_560)
James payment will be $ 51922
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