A donation of $250,000 is made today to the local library for the purchase of new books. What amount can be withdrawn every month in perpetuity if the money is earning 9% compounded monthly and the first payment is to be made immediately?

A) $2,250.00
B) $1,875.00
C) $1,861.04
D) $1575.00
E) $1562.77

Question

Mehmet Emin ÖZGÜVEN · Accepted Answer

Final Answer : C, Explanation :   The correct answer can be found using the formula for the perpetuity immediate withdrawal:   P M T = P V × i n PMT = PV 	imes \frac{i}{n} PMT = P V × n i ​  , where PMT is the monthly payment, PV is the present value ($250,000), i is the annual interest rate (9% or 0.09), and n is the number of compounding periods per year (12 for monthly). Plugging in the values:   P M T = 250 , 000 × 0.09 12 = 1 , 861.04 PMT = 250,000 	imes \frac{0.09}{12} = 1,861.04 PMT = 250 , 000 × 12 0.09 ​ = 1 , 861.04  .

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A donation of $250,000 is made today to the local library for the purchase of new books. What amount can be withdrawn every month in perpetuity if the money is earning 9% compounded monthly and the first payment is to be made immediately?A) $2,250.00B) $1,875.00C) $1,861.04D) $1575.00E) $1562.77

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