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Math Help - Present Value Annuity

  1. #1
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    Present Value Annuity

    If Crystal invests $1000 at 4% per year compounded semiannually, how much can she withdraw at the end of every 6 months to use up the fund exactly at the end of 20 years? Express the answer in terms of present value annuity symbols (a or a-double-dot) and evaluate numerically.

    So I think it's something like 1000(a angle 40) 0.04 , with v = 1/1.04 , which then equals 1000(1-v40 / .04) but the answer is $36.56 so I know I'm doing something wrong. Thanks!
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  2. #2
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    Quote Originally Posted by tbl9301 View Post
    If Crystal invests $1000 at 4% per year compounded semiannually, how much can she withdraw at the end of every 6 months to use up the fund exactly at the end of 20 years? Express the answer in terms of present value annuity symbols (a or a-double-dot) and evaluate numerically.

    So I think it's something like 1000(a angle 40) 0.04 , with v = 1/1.04 , which then equals 1000(1-v40 / .04) but the answer is $36.56 so I know I'm doing something wrong. Thanks!
    1) You're backwards: 1000 = p*(1-v40 / .04) is closer. Solve for p.

    2) You forgot a piece of the semi-annial compounding. 1000 = p*(1-v40 / .02)
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