If you have $4,000 in an account today and withdraw $2,000 in 3 years, how much can you withdraw from the account in 5 years, if the account earns interest at
8% per year, compounded annually?
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A. B. C. D. E.Explanation
The way to approach this problem is to find the PV today of the $2,000 amount, determine the difference between this amount and the original $4,000 amount, and then move this remaining amount to the 5 year point. On the BAII Plus, press 3 N, 8 I/Y, 2000 FV, 0 PMT, CPT PV, which yields $1,587.66. Then press +
4000 =. Then press PV, 5 N, CPT FV to see the answer. On the HP12C, press 3 n, 8 i, 2000 FV, 0 PMT, CPT PV. Then press 4000 +. Then press PV, 5 n, CPT
FV to see the answer. Make sure the BAII Plus has the P/Y value set to 1.