Interest Rate per Year 4% 6% 8% 20.9 10% Payout per Year 10% (% of principal) 20% 30%

EBK CFIN
6th Edition
ISBN:9781337671743
Author:BESLEY
Publisher:BESLEY
Chapter4: Time Value Of Money
Section: Chapter Questions
Problem 22PROB
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An investor has a principal amount of $P. If he desires a payout (return) of 0.1P each year, how many years will it take to deplete an account that earns 8% per year? 0.1P = P(A/P, 8%,N), so N ∼=21 years. A payout duration table can be constructed for select payout percentages and compound interest rates. Complete the following table. (Note: table entries are years.) Summarize your conclusions about the pattern observed in the shown table.

Interest Rate per Year
4% 6% 8%
20.9
10%
Payout per Year 10%
(% of principal) 20%
30%
Transcribed Image Text:Interest Rate per Year 4% 6% 8% 20.9 10% Payout per Year 10% (% of principal) 20% 30%
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