Originally Posted by
mathceleb Rambo,
Your initial deposit is at time 0. Beginning of Year. Your first deposit is at the end of year 1. Therefore, your initial deposit has already had 1 year of interest. So, when your last withdrawal at the end of year 8 occurs, your initial deposit at time 0 has already had 9 years to accumulate interest.
Also, you are accumulating in this problem, not discounting. Therefore, your series;
(1/(1.04)^1+1/(1.04)^2+1/(1.04)^3+1/(1.04)^4+1/(1.04)^5+1/(1.04)^6+1/(1.04)^7+1/(1.04)^8))= should not have 1/'s in it.
it should be:
(1.04)^1+(1.04)^2+(1.04)^3+(1.04)^4+(1.04)^5+(1.04 )^6+(1.04)^7
Since your withdrawals are at the end of the month, your time is 1 less.