Problem

Starting three months after her grandson Robin's birth, Mrs. Devine made deposits of $\$ 100$ into a trust fund every three months until Robin was eighteen years old. The trust fund provides for equal withdrawals at the end of each quarter for two years, beginning three months after the last deposit. If interest is $4.07 \%$ compounded quarterly, how much will Robin receive every three months?
Robin will receive $\$ \square$.
(Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.)

Answer

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Answer

Finally, we round the result to the nearest cent to get the final answer: Robin will receive \(\boxed{\$1317.93}\) every three months

Steps

Step 1 :Let's denote the amount of each deposit as \(P = \$100\)

Step 2 :The annual interest rate is \(r = 4.07\% = 0.0407\)

Step 3 :The interest is compounded quarterly, so the number of times interest is compounded per year is \(n = 4\)

Step 4 :Mrs. Devine made deposits for 18 years, so the total number of deposits is \(t = 18\) years

Step 5 :We can calculate the future value of the deposits using the formula for the future value of a series of equal deposits (or an annuity): \(FV = P \times \left(\frac{(1 + r/n)^{n \times t} - 1}{r/n}\right)\)

Step 6 :Three months after the last deposit, Robin starts to withdraw money every three months for two years, so the total number of withdrawals is \(2 \times n = 8\)

Step 7 :We can calculate the amount of each withdrawal by dividing the future value of the deposits by the total number of withdrawals: \(\text{withdrawal amount} = \frac{FV}{\text{total withdrawals}}\)

Step 8 :By substituting the given values into the formulas, we can calculate the amount of each withdrawal

Step 9 :Finally, we round the result to the nearest cent to get the final answer: Robin will receive \(\boxed{\$1317.93}\) every three months

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