TVM Problems

Dear All,

Please see the below problem

Your great-uncle Claude is 82 years old. Over the years, he has accumulated savings of $80,000. He estimates that he will live another 10 years at the most and wants to spend his savings by then. (If he lives longer than that, he figures you will be happy to take care of him.) Uncle Claude places his $80,000 into an account earning 10 percent annually and sets it up in such a way that he will be making 10 equal annual withdrawals ( the first one occurring 1 year from now ) such that his account balance will be zero at the end of 10 years. How much will he be able to withdraw each year?

I used BGN mode considering it as Annuity due (Reason : The first one occurring 1 yr from now ), the ans is -11,836.02.

But the book answer is -13,019.02. It considered this as Ordinary annuity.

Who is correct?



1 Like

An annuity due has payments at the beginning of each period. Here, the first payment is one year from today: at the end of the (first) period. This is an ordinary annuity.


My mistake. I overlooked the 1 year. Yes. You are right. Thanks a lot for correcting me.

Cheers :slight_smile:


My pleasure.

Bro can you send me the solution of this question in my mail plzzzz? email:

On the BAII

END (2nd PMT gets you to where you can set BEG or END)
10 N 10 I PV -80000 CPT PMT 13,019.63159

If the first payment happened today, then it would be an annuity due producing a payment of 11,863.02.