Dear All,
Please see the below problem
Your great-uncle Claude is 82 years old. Over the years, he has accumulated savings of $80,000. He estimates that he will live another 10 years at the most and wants to spend his savings by then. (If he lives longer than that, he figures you will be happy to take care of him.) Uncle Claude places his $80,000 into an account earning 10 percent annually and sets it up in such a way that he will be making 10 equal annual withdrawals (the first one occurring 1 year from now) such that his account balance will be zero at the end of 10 years. How much will he be able to withdraw each year?
I used BGN mode considering it as Annuity due (Reason :The first one occurring 1 yr from now), the ans is -11,836.02.
But the book answer is -13,019.02. It considered this as Ordinary annuity.
Who is correct?
TIA
Deepak
Please see the below problem
Your great-uncle Claude is 82 years old. Over the years, he has accumulated savings of $80,000. He estimates that he will live another 10 years at the most and wants to spend his savings by then. (If he lives longer than that, he figures you will be happy to take care of him.) Uncle Claude places his $80,000 into an account earning 10 percent annually and sets it up in such a way that he will be making 10 equal annual withdrawals (the first one occurring 1 year from now) such that his account balance will be zero at the end of 10 years. How much will he be able to withdraw each year?
I used BGN mode considering it as Annuity due (Reason :The first one occurring 1 yr from now), the ans is -11,836.02.
But the book answer is -13,019.02. It considered this as Ordinary annuity.
Who is correct?
TIA
Deepak
