What is the amount of 10 equal annual deposits that can provide five annual withdrawals when a first withdrawal of $5,000 is made at the end of year 11 and subsequent withrawals incease at the rate of 8% per year over the previous years withdrawals if the interest rate is 9% compounded annually?

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a.$1,500
b.$1,298
c.$1,482
d.$1,389

EXPERT ANSWER

Present value at the end of year 10=5000/1.09^1+(5000*1.08^1)/1.09^2+(5000*1.08^2)/1.09^3+(5000*1.08^3)/1.09^4+(5000*1.08^4)/1.09^5

=22518.78

now

22518.78=A(F/A,9%,10)=15.1929A

A=1482