A grandfather wishes to set up a fund today that will allow his grandson to withdraw $5,000 from the fund at the end of each year for four years to pay for college expenses. The first withdrawal is to occur one year from today. How should grandpa compute the required investment if the fund is to earn 6% interest compounded annually and the fund is to be exhausted by the grandson"s last withdrawal?
- $5,000 multiplied by the factor for the present value of 1 where n = 4, i = 6%.
- $5,000 divided by the factor for the present value of 1 where n = 4, i = 6%.
- $5,000 multiplied by the factor for the present value of an annuity of 1 where n = 4, i = 6%.
- $5,000 divided by the factor for the present value of 1 where n = 4, i = 6%.