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Benjamin is planning to go to graduate school in a program that will take three years. Benjamin wants to have $10,000 available each year for his school and living expenses. If he earns 6% on his investments, approximately how much must be deposited at the start of his studies for him to withdraw $10,000 a year for three years

Respuesta :

Answer:

$26,730

Explanation:

The amount to be deposited can be determined by finding the present value of the annuity

Present value is the sum of discounted cash flows

Present value can be calculated using a financial calculator

Cash flow each year from year 1 to 3 = $10,000

I = 6%

PV = $26,730

To find the PV using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.  

3. Press compute