Gary has just retired, and has 1000000 dollars in his retirement account. The ac

Question

Gary has just retired, and has 1000000 dollars in his retirement account. The account will earn interest at an annual rate of 5 percent, compounded monthly.

At the end of each month, Gary will withdraw a fixed amount to cover his living expenses.

Gary wants his savings to last exactly 25 years. How much money can he withdraw each month?

(Give your answer in dollars, correct to the nearest cent.)

monthly withdrawal:

What is the maximum amount that Gary can withdraw each month if he wants his savings to last indefinitely?

monthly withdrawal:

Explanation / Answer

1)Let X be the amount of money he can withdraw each month, n= 25yrs x 12mo = 300, r = 0.05/12 Thus, we have PV = X * (( 1-(1/1+r)^n)r
Thus, X = 1000000/171.06 = 5845.90

2) n is infinity

so PV = X/r

so X = PV/r


=1000000*(0.05/12) = 4.166.67

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