Judge Drago shall deposit $64,800 today in accordance with the provided statement to give Emma a money to cover her college expenses.
A sort of investment known as a fund gathers money from several investors. The funds are then invested in a range of equities and bonds by fund managers. A fraction of the securities in the fund are divided among each investor in the form of units.
The formula for determining the current value (PV) of such an ordinary annuity, which is denoted as follows, should be used as Judge Drago intends Emma to begin collecting $20,000 for tuition commencing in one year.
PV = P × [{1 - [1 ÷ (1+r)]^n} ÷ r] …………………………………. (1)
Where;
PV = Amount to deposit today =?
P = yearly withdrawal = $20,000
r = interest rate = 9%, or 0.09
n = number of years = 4
Equation (1) should be changed to reflect the values as follows:
PV = $20,000 × [{1 - [1 ÷ (1 + 0.09)]^4} ÷ 0.09]
= $20,000 × 3.24
PV = $64,800
As a result, Judge Drago needs to make a deposit of $64,800 today to just provide Emma money to cover her college expenses.
To know more about Fund visit:
https://brainly.com/question/14705214
#SPJ4
The complete question is-
Judge Drago has decided to set up an educational fund for his favorite granddaughter, Emma, who will start college in one year. The judge plans to deposit an amount in a savings account that pays 7% annual interest. He wants to deposit an amount that is sufficient to permit Emma to withdraw $21,100 for tuition starting in one year and continuing each year for a total of four years. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.)How much should he deposit today to provide Emma with a fund to pay for her college tuition? (Round your answer to nearest whole dollar.)
