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**azhar****Member**- Registered: 2008-10-31
- Posts: 1

If you want to withdraw Rs 25,000 at the end of each year for the next 7 years then what amount must you invest today at 5% compounded quarterly?

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**musician_14****Member**- Registered: 2008-11-01
- Posts: 4

If you want to withdraw 25 000 at the end of each year, for the next 7 years, you must invest $144 165.0453.

We can check by the following....

The interest of 5% compounded quarterly may be written as (1.0125)^4 (total interest earned after each year on amount still invested).

Amount Invested: $144 165.0453

After Year 1: $144 165.0453 x (1.0125)^4 = 151 509.5821 after one year subtract 25000. Amount still invested: $126 509.5821

After Year 2: $126 509.5821 x (1.0125)^4 = 132 954,6554 after two years subtract 25000. Amount still invested: $107 954.6554

After Year 3: $107 954.6554 x (1.0125)^4 = 113 454.4417 after three years subtract 25000. Amount still invested: $88 454.44168

After Year 4: $88 454.44168 x (1.0125)^4 = 92 960.78301 after four years subtract 25000. Amount still invested: $67 960.78301

After Year 5: $67 960.78301 x (1.0125)^4 = 71 423.068 after five years subtract 25000. Amount still invested: $46 423.068

After Year 6: $46 423.068 x (1.0125)^4 = 48 788.10684 after six years subtract 25000. Amount still invested: $23 788.10684

After Year 7: $23 788.10684 x (1.0125)^4 = 24 999.999996 after seven years subtract 25000. Amount still invested: $0.00

*Last edited by musician_14 (2008-11-01 14:33:38)*

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**Ms. Bitters****Member**- Registered: 2008-07-31
- Posts: 19

OR

Using the formula approach, you first convert your nominal rate of 5% compounded quarterly into its effective rate. Thus

You then apply the ordinary amortization formula. Thus

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