Answer:
Amount he must have in his account today is $5,617.92
Step-by-step explanation:
Data provided in the question:
Regular withdraw amount = $900
Average annual interest rate, i = 4% = 0.04
Time, n = 7 years
Now,
Present Value = [tex]C \times\left[ \frac{1-(1+i)^{-n}}{i} \right] \times(1 + i)[/tex]
here,
C = Regular withdraw amount
Thus,
Present Value = [tex]C \times\left[ \frac{1-(1+i)^{-n}}{i} \right] \times(1 + i)[/tex]
Present Value = [tex]900 \times\left[ \frac{1-(1+0.04)^{-7}}{ 0.04 } \right] \times(1 + 0.04)[/tex]
Present Value = [tex]936 \times\left[ \frac{1 - 1.04^{-7}}{ 0.04} \right][/tex]
Present Value = [tex]936 \times\left[ \frac{1 - 0.759918}{ 0.04} \right][/tex]
Present Value = 936 × 6.00205
or
Present Value = $5,617.92
Hence,
Amount he must have in his account today is $5,617.92
