Anyone good at math? Time value of money questions that I am stumped on

[hangin1]

Hello I currently am taking a finance class and have gotten stumped on a couple time value of money questions so I figured I would see if maybe anyone on this forum would be able to help me out here. the following questions are the ones that have me stumped so I do appreciate the help and if no one can help well at it was at least worth a shot.

1. Assume it is January 1, 2008 and you have just fallen in love with the perfect mate. The only problem is that s/he has a eight year old son from a previous marriage who you will have to send to college. Assuming a 10% interest rate, how much will you have to put in the bank at the end of each of the next ten years (2008-2017) so the son can withdraw $20,000 per year for six years starting January 1, 2018?

2. Assume you have just inherited $600,000. Because of this, you have decided to quit your job and live off this inheritance. To make the money last, you have decided to invest it at 12% and withdraw it in 20 equal amounts over the next 20 years. Your first withdrawal will be one year from today. How much will you be able to withdraw each year?

 

[angelique510]

Use the compound interest function in Microsoft Excel. Just keep plunking in numbers until it comes out right.

For the second question - that would be a function within a function to get the 20 equal payments, taking into consideration that you are taking away from the principle plus adding interest every year.

Come to think of it, you need to do that for the first one, because he will be taking out $20k a year, but still getting interest on what's left. But at least you know how much is being removed each time.

It's been so long since I have done anything like this - and I just woke up. An Excel genius could answer this for you very quickly. I know we have some here.

~A