Your uncle has $475,000 and wants to retire. He expects to live for another 25 y
ID: 2650368 • Letter: Y
Question
Your uncle has $475,000 and wants to retire. He expects to live for another 25 years, and he also expects to earn 8.5% on his invested funds. How much could he withdraw at the beginning of each of the next 25 years and end up with zero in the account? Your uncle has $475,000 and wants to retire. He expects to live for another 25 years, and he also expects to earn 8.5% on his invested funds. How much could he withdraw at the beginning of each of the next 25 years and end up with zero in the account? Your uncle has $475,000 and wants to retire. He expects to live for another 25 years, and he also expects to earn 8.5% on his invested funds. How much could he withdraw at the beginning of each of the next 25 years and end up with zero in the account?Explanation / Answer
Answer:
Calculation of Withdrawals using present value of Annuity due formula :
Present value =P +P *[1-{(1+r)^(-n+1)} /r]
Present value = $475000
P = Annual Withdrawal Amount
r= rate on interest =8.5% =0.085
n= Number of years =25
Hence :
475000 =P +P *[1-{(1+0.085)^(-25+1)} /0.085]
P +P *[(1-0.1411518) /0.085] =475000
P +P* 10.1041 =475000
11.1041 P =475000
P = 475000 /11.1041
=$42776.99
Hence Uncle can withdraw $42776.99 Per year
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.