Ok, one more, Finance question....damnit....

[emptywallet]

Ok, one more. I can't figure this one out for the life of me.

"$10,000 is deposited for 10 years in an account paying 8% compounded quarterly. At the end of the 10 year period, I want to make 20 quarterly withdrawals. What is the size of each withdrawal?"

The answer it gives is $1,350.36 But I can't for the life of me come up with that.

 

[KAYNE]

YOU MUST BE IN YOUR FIRST FINANCE CLASS AT SCHOOL. IF THIS WERE TWO YEARS AGO, I COULD ANSWER THAT FOR YOU BUT MY BRAIN DOESNT KEEP KNOWLEDGE THAT LONG. LOL I CANT EVEN FIND MY BUSINESS CALCULATOR TO FIGURE IT OUT.



KAYNE

 

[vinylgroover]

Sure that's the full question?

 

[emptywallet]

Sure that's the full question?

Yep thats the full question.

 

[Lestat]

you've got 22,080.40 after 10 years...

now just figure out the second half (the hard part)

 

[emptywallet]

you've got 22,080.40 after 10 years...

now just figure out the second half (the hard part)

thats what I'm saying, I can come up with that number, I just can't see how to get the answer from it. Just dividing by 20 doesnt work..................

 

[fogg88]

I don't know if this will help you at all, but let me throw this out there just in case you haven't already approached it this way...

You should have gotten $21,936.08 for the amount in the account after the ten years are up. ...got this number from an online calculator here:

http://www.interest.com/hugh/calc/savings.cgi?amt=10,000&dep=&cmp=Quarterly&int=8&yrs=10

Now, if the interest stopped accumulating at 10 years and you took 20 payments, they would each be $1096.80. However, the money is still in an interest bearing account, so it will continue to accrue interest even in the payment period, which would account for a higher payment amount. As far as how to calculate that exact amount.... ?

Of course, you probably already had this much figured, but I thought I'd throw in my two-cents anyway. Good luck!

 

[vinylgroover]

Got it.

When you've calculated the FV after 10 years, that amount becomes your PV of 22,080.4. Then you need to calculate payments for the next 20 quarters assuming the same interest.

so the calculation becomes: PV: 22,080.4
FV: 0
i: 8/2
n: 20

Answer = $1350

 

[fogg88]

damn, you're good.

 

[Lestat]

Got it.

When you've calculated the FV after 10 years, that amount becomes your PV of 22,080.4. Then you need to calculate payments for the next 20 quarters assuming the same interest.

so the calculation becomes: PV: 22,080.4
FV: 0
i: 8/2
n: 20

Answer = $1350

How do you put all thnose numbers together?

Whats the algorithm?

 

[KAYNE]

YOU BASTARDS ARE GOING TO MAKE ME BREAK OUT MY BUSINESS CALCULATOR AND START DOING THIS SHIT AGAIN AFTER 4 SEMESTERS. I HATED THESE TYPES OF PROBLEMS BUT COULDNT RESIST DOING THEM. DAMN.

I MUST SAY THAT INVESTMENT ANALYSIS IS MUCH MORE INTERESTING. CORPERATE FINANCE ON THE OTHERHAND, SUX RHINO DICK. I DONT KNOW, MAYBE ITS MY TEACHER.


KAYNE

 

[vinylgroover]

The future value of 22,080.4 becomes the new present value at the end of 10 years.

By formula:

PMT = PV x i/ (1-(1+i)-n )

The negative 'n' is to the power of, because you are discounting the payments.

 

[vinylgroover]

Lestat,

It's obviously far easier to just plug into a financial calculator once you work out the logical progression of what you are trying to workout.

 

[VicTusDeuS]

YOU BASTARDS ARE GOING TO MAKE ME BREAK OUT MY BUSINESS CALCULATOR AND START DOING THIS SHIT AGAIN AFTER 4 SEMESTERS. I HATED THESE TYPES OF PROBLEMS BUT COULDNT RESIST DOING THEM. DAMN.

I MUST SAY THAT INVESTMENT ANALYSIS IS MUCH MORE INTERESTING. CORPERATE FINANCE ON THE OTHERHAND, SUX RHINO DICK. I DONT KNOW, MAYBE ITS MY TEACHER.


KAYNE

same here, my brain is fried right now...

 

[KAYNE]

same here, my brain is fried right now...

YEAH, MINE TO, I TOOK 4 TESTS THURSDAY. I DONT EVEN WANT TO THINK IF I DONT HAVE TO.


KAYNE

 

[emptywallet]

Got it.

When you've calculated the FV after 10 years, that amount becomes your PV of 22,080.4. Then you need to calculate payments for the next 20 quarters assuming the same interest.

so the calculation becomes: PV: 22,080.4
FV: 0
i: 8/2
n: 20

Answer = $1350

So your looking for R, or payments, kinda like a sinking fund.