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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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If $80,000 is invested in a fund on December 31, 2019, what is the amount of each of 6 annual withdrawals starting on December 31, 2020, that would deplete the fund if the interest rate earned in the fund is 10% compounded annually?

To determine

Determine the amount of each of six annual withdrawals.

Explanation

 Annuity: An annuity is referred as a sequence of payment of fixed amount of cash flows that occurs over the equal intervals of time.

Determine the cash flow of each time period.

Present valueO= Cash flow ×(pOn,i)$80,000= Cash flow ×(pOn=6,i=10%)$80,000= Cash flow ×4

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