Beginning three months from now, you want to be able to withdraw $2,700 each quarter from your bank account to cover college expenses over the next three years. If the account pays 0.49 percent interest per quarter, how much do you need to have in your bank account today to meet your expense needs over the next three years? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

PVA

$

rev: 11_14_2012

Explanation:

The cash flows are simply an annuity with four payments per year for three years, or 12 payments. We can use the PVA equation:

PVA = C({1 − [1/(1 + r)t]} / r)

PVA = $2,700{[1 − (1/1.0049)12] / 0.0049}

PVA = $31,391.23

 

Calculator Solution:

Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the calculation.

   

Enter

3 × 4

0.49%

$2,700

N

I/Y

PV

PMT

FV

Solve for

$31,391.23